The National Bank of Cambodia (NBC) has announced a major policy shift, allowing commercial banks and payment firms to process cryptocurrencies for the first time. However, the permission is limited to Category 1 crypto assets, which include fiat-backed stablecoins like USD Coin (USDC), Tether (USDT), and central bank digital currencies (CBDCs). Standalone cryptocurrencies such as Bitcoin and Ethereum are still prohibited.

Under the new framework, financial institutions can offer services like converting crypto to fiat and vice versa, facilitating crypto transfers, and providing custody for digital assets. This marks a significant step forward for Cambodia, which had previously banned citizens from transacting or trading cryptocurrencies due to concerns over volatility and illicit activities.

To ensure regulatory compliance, banks and payment firms must receive prior approval from the NBC before launching crypto-related services. Institutions are also barred from using clients' crypto assets for their own benefit, maintaining stringent safeguards.

This cautious approach aligns with Cambodia’s broader strategy of fostering digital currency adoption while mitigating risks. Earlier this year, Cambodia blocked 16 major crypto exchanges, including Binance and Coinbase, for failing to secure operating licenses from the Securities and Exchange Regulator. Despite these restrictions, the country is gradually exploring the potential of digital currencies tied to fiat, with NBC Governor Chea Serey emphasizing the role of digital currencies in strengthening the Cambodian riel and reducing reliance on the U.S. dollar.

While Cambodia’s embrace of stablecoins signals progress, the nation remains in the early stages of crypto adoption compared to global players like Hong Kong and the UAE. This move reflects a cautious yet deliberate effort to balance innovation with financial stability.