NBC lays down guidelines for cryptoasset-related activities
NBC lays down guidelines for cryptoasset-related activities
In a major decision, the National Bank of Cambodia (NBC) Friday issued a Prakas (or directive) to regulate cryptoasset-related activities in the country’s financial system. It marks a pivotal step in Cambodia’s journey toward embracing digital finance while maintaining regulatory oversight and financial stability.
According to the Prakas, a copy obtained by Khmer Times, NBC’s initiative is based on the Law on Banking and Financial Institutions to promote financial stability while addressing the challenges and risks associated with the use of crypto assets.
“NBC has decided to implement the Prakas on transactions related to cryptoassets to govern transactions and businesses related to crypto assets Group 1, in accordance with the Law on Banking and Financial Institutions.
“However, this Prakas does not allow commercial banks to hold Group 2 of cryptocurrencies i.e., Unbacked Crypto assets and high-risk assets such as Bitcoin,” NBC said.
It added that the Prakas permits commercial banks, payment service providers under the jurisdiction of the National Bank of Cambodia, and other legal entities to conduct transactions related to cryptocurrency assets without prior approval or a license from NBC.
“The Prakas applies to all commercial banks and payment service institutions under NBC’s supervision. These institutions, along with other entities intending to operate as Cryptoasset Service Providers (CASPs), must adhere to the guidelines,” the Prakas said.
CASPs are defined as entities that offer services such as exchanging, transferring, or safekeeping cryptoassets. The Prakas outlines criteria for authorization and licensing, detailed further in separate regulations.
Cryptoassets are defined as digital representations of value that leverage cryptography and distributed ledger technology (DLT). They can be used for payments, investments, or access to goods and services. Notably, the Prakas excludes central bank digital currencies (CBDCs) and traditional securities from its definition.
Crypto assets are categorized into two groups – Group 1 includes tokenized traditional assets and stablecoins tied to real assets or pools of assets. Group 1a includes tokenized traditional assets, such as bonds or equities, using DLT for ownership recording. Similarly, Group 1b constitutes stablecoins with mechanisms to maintain value relative to reserve assets, excluding algorithm-based stablecoins. And Group 2 covers all other cryptoassets, including unbacked cryptocurrencies and those not tied to real assets.
“Each group is subject to specific criteria to ensure stability and regulatory compliance,” the Prakas said.
With governance and risk management, the Prakas mandates commercial banks to establish strong governance structures and comprehensive risk management systems to handle cryptoasset-related activities. Boards of directors are responsible for approving policies, ensuring effective oversight, and monitoring compliance with risk management frameworks.
“Risk policies must address a wide range of issues, including credit, market, and operational risks, technology risks, including cybersecurity and ICT (Information, Communication, Technology) risks, legal and reputational risks, and compliance with anti-money laundering (AML) and counter-terrorism financing (CFT) standards,” it said.
Senior management is responsible for implementing the approved policies and ensuring they are effectively operationalized.
Commercial banks seeking to engage in cryptoasset activities must obtain prior approval from NBC, avoid issuing their own crypto assets, refrain from direct or indirect transactions involving Group 2 crypto assets.
For Group 1 assets, commercial banks must adhere to exposure limits – Group 1a: Up to 5 percent of Common Equity Tier 1 Capital (CET1), and Group 1b: Up to 3 percent of CET1.
Applications for NBC approval must include board decisions, assessments of financial impacts, legal due diligence, and three-year business plans. NBC is required to respond within 60 working days.
“For the role of CASPs, entities offering cryptoasset services, such as exchanges, transfers, or custody, must obtain a license from NBC.
“However, CASPs are prohibited from using customers’ cryptoassets for their own business purposes, promoting cryptoassets as a payment method, and advertising specific cryptoassets, though they may advertise their services.
“CASPs must ensure compliance with governance and risk management standards equivalent to those imposed on commercial banks,” NBC explained.
For sanctions and penalties, the Prakas outlines strict penalties for non-compliance: fines of up to 500 million Riels per transaction for prohibited activities, such as Group 2 exposures, daily fines for delayed corrective actions or reporting failures, and other penalties for breaches of risk management or operational guidelines.
The sanctions emphasized NBC’s commitment to enforcing the regulations and deterring violations.
The Prakas reflects NBC’s cautious yet forward-thinking approach to integrating crypto assets into the financial system.
