A Positive Move Toward Legalization: The National Bank of Cambodia’s Approach to Governing Cryptoasset Businesses
On 26 December 2024, the National Bank of Cambodia (“NBC”) issued Prakas No. 735 on Transactions Related to Cryptoassets (“Prakas No. 735”). This Prakas establishes guidelines for managing transactions and business activities related to cryptoassets in accordance with Articles 2 to 4 of the Law on Banking and Financial Institutions.
The Prakas applies to Commercial Banks and Payment Service Institutions (“PSIs”) under the supervision of the NBC as well as any entities engaged in exchanging cryptoassets for fiat currencies, commonly referred to as crypto service providers (“CASPs”). CASPs refer to any entity that offers services or engages in activities related to cryptoassets on behalf of customers, namely (a) exchange against official currencies or other cryptoassets; (b) transfer services; and/or (c) custody and administration.
What is the importance of this new legal instrument?
This Prakas mark a significant regulatory shift, meaning that, for the first time, the national authority is adopting a more structured and cautious approach to regulating the cryptoasset sector.
Definition
Prakas No. 735 defined cryptoassets as the digital representations of value that rely on cryptography and distributed ledger technology (“DLT”). They can be traded, transferred, or used for payments, investments, or accessing goods and services. Examples include tokenized assets, stablecoins, utility tokens, and security tokens, but not central bank digital currencies (CBDCs).
Classification of Crypotoassets
Crypotoassets are categorized into two groups: Group 1 and Group 2
| Group | Category | Description | Conditions for Classification |
| Group 1 | Group 1 | Tokenized traditional assets recorded using DLT or similar technology | 1. use cryptography, DLT, or similar technology to record ownership. 2. pose the same level of risk and confer the same rights as the reference assets. 3. assets include corporate bonds, loans, deposits, equities, derivatives, commodities, and cash in custody. 4. exposed to the same credit and market risk as the corresponding traditional assets. |
| Group 1b | Stablecoins with effective stabilization mechanisms linked to traditional assets or a pool of them | 1. redeemable for a predefined amount of reference assets (peg value). 2. stabilization mechanism must minimize market value fluctuations relative to peg value. 3. reliable ownership verification of reserve assets. 4. issuer must be supervised and regulated by a central bank or authority. 5. shall pass a redemption risk test. | |
| Additional Requirements | (Applies to both Group 1a and Group 1b) | 1. clear and enforceable legal rights and obligations across jurisdictions. 2. network functions, including DLT or similar technology, must manage risks effectively. 3. DLT must rely on permissioned ledgers. 4. entities managing redemptions, transfers, storage, or reserve assets shall be regulated by authorities. | |
| Group 2 | Unbacked assets | Do not meet the criteria for Group 1 classification, such as unbacked cryptoassets, non-stablecoins, or cryptoassets not linked to traditional assets. | N/A |
Commercial Bank’s Exposures
Commercial banks shall secure prior approval from the NBC before operating crypto asset activities—whether for own accounts or their customers. These entities are also required to establish, approve and oversee risk management policies. This includes ensuring compliance, providing staff training, and setting up effective reporting systems.
For managing risks associated with crypto assets, the NBC applies the principle of “same activities, same risks, same regulations” to exposures to Group 1. This means crypto assets are treated similarly to traditional assets when it comes to banking and trading activities. In any event, commercial banks are barred form carry out, directly, or indirectly, any exposure with Group 2.
The NBC has also set clear limits on how much exposure commercial banks can have to certain types of crypto assets:
- Group 1a (e.g., tokenized traditional assets): Exposure is capped at 5% of Common Equity Tier 1 (“CET1”) Capital.
- Group 1b (e.g., stablecoins): Exposure is limited to 3% of CET1 Capital.
Commercial banks shall report quarterly on the nature and value of cryptoasset exposures and adhere to reporting requirements under applicable regulation.
Cryptoasset services
Any commercial banks, PSIs, or any entities acting as CASPs wishing to operate one or more of the following services shall obtain prior authorization from the NBC:
- Exchange: Trading cryptoassets for fiat currency (off-ramp), fiat for cryptoassets (on-ramp), or between cryptoassets.
- Transfer: Moving cryptoassets between accounts or addresses.
- Safekeeping or administration: Managing or safeguarding customers’ cryptoasset wallets, with potential exclusive control over private keys or smart contracts..
Non-compliance
Commercial banks, payment service institutions, and licensed CASPs failing to comply with this Prakas will face penalties under Article 52 of the Law on Banking and Financial Institutions. Additional fines imposed by the NBC include:
- Non-compliance with the prohibition of activities for commercial banks: Fine of KHR 500,000,000 (five hundred million riels) per transaction.
- Breaching exposure thresholds of CET1 Capital: Fines ranging from KHR 20,000,000 (twenty million riels) to KHR 500,000,000 (five hundred million riels) per transaction.
- Failure to meet reporting obligations: Fine of KHR 1,000,000 (one million riels) per day.
- Other violations: Fine of KHR 3,000,000 (three million riels) per day from the deadline for corrective action specified by the NBC.
Contributing Authors:
Panharith LONG
Associate
+855 12 252 189
Sopheareach PRUM
Paralegal
+855 89 346 506
prum.sopheareach@soksiphana.com
Kunpichproseth CHHEA
Paralegal
+855 10 589 877
Kunpichproseth.chhea@soksiphana.com
[Disclaimer: The information provided herein is for the reader information only and is not intended to offer any form of legal advice. Always obtain formal legal advice from qualified legal counsel with respect to this matter]
