Since its inception, cryptocurrency has been a hot topic of discussion. Some people see it as the future of money, while others are hesitant to use it. Regardless of your opinion on cryptocurrency, one thing is for sure: it is here to stay. In this blog post, we will provide you with a whistle-stop tour through:
- Cryptocurrency Definition
- The Current State of Cryptocurrency in Cambodia
- The Number of Cambodians Using Cryptocurrency
- Bakong as an Alternative to Cryptocurrency
- 3 Benefits of Investing in Cryptocurrency in Cambodia
- 3 Risks When Using Cryptocurrency in Cambodia
- The Future Hold for Cryptocurrency in Cambodia
What is cryptocurrency?
Cryptocurrency is a digital currency that uses cryptography, to securely store, transact, and exchange. It’s become an increasingly popular asset among individuals and companies as it passes over traditional banking systems and allows business transactions without a middleman.
Note that cryptography is a method of protecting information and communications through the use of codes. Therefore, only those for whom the information is intended can read and process it.
Cryptocurrency is decentralized, meaning no government or financial institution controls it. This makes cryptocurrency more secure than traditional money and other forms of digital payment, granting users more control over their funds. Additionally, cryptocurrency can provide more privacy than government-issued currencies, making cryptocurrency appealing in certain situations where anonymity is desired.
What is the current state of cryptocurrency in Cambodia?
Cambodia has taken a relatively reserved stance on cryptocurrency, with the National Bank of Cambodia (NBC) issuing a directive in 2019 banning all forms of cryptocurrency transactions in the country. This ban was enforced through financial institutions and payment processors, effectively preventing any crypto trading within Cambodia’s borders.
Although this ban does not apply to individuals willing to invest their money in cryptocurrency, it prevents any type of institutional investment or regulation from taking place.
Moreover, the National Bank of Cambodia (NBC) has recently issued a warning against fraud related to crypto investments. It has released guidelines for providers of digital currency services, including anti-money laundering provisions and requirements relating to customer due diligence.
While the government is taking a cautious approach to regulating cryptocurrency, it appears that they are interested in developing a state-backed digital currency. In 2019, NBC announced they were exploring ways to develop their own Central Bank Digital Currency (CBDC). This move could potentially have significant implications for the country’s domestic and international payment systems.
The primary players involved with cryptocurrency in Cambodia are the National Bank of Cambodia (NBC), local payment processors such as Wing Money and TrueMoney, and several international exchanges such as Binance and Kucoin. NBC, however, has consistently attempted to regulate crypto-related activities within the country’s borders by issuing directives like those mentioned above.
Consequently, local payment processors have also taken steps to ensure that there is no illicit activity associated with their services by incorporating Know Your Customer (KYC) protocols into their systems. On the other hand, international exchanges have become increasingly popular due to their ease of use and access to global markets.
How many Cambodians are using cryptocurrency?
Our most recent survey, conducted in Cambodia in November 2022, which included over 500 Cambodians, indicates that one out of every 10 Cambodians (10.63%) have used cryptocurrency. Meanwhile, 21.25% of them don’t know what cryptocurrency is, while the other 68.12% stated that they don’t use it.
Although the Cambodian Riel is more common, it’s interesting to note that more than half of the sampled respondents (56.17%) also frequently use US dollars in the country. Meanwhile, very few people do transactions using cryptocurrencies at only 0.57%.
Bakong: The Cryptocurrency Alternative?
What is Bakong?
Bakong is a mobile payment and banking platform that allows users of participating banks to effortlessly transfer funds and make payments by scanning QR codes and entering phone numbers to send/receive money to other local financial institutions. It was launched by the National Bank of Cambodia (NBC) and is available to retail customers of local banks, financial institutions, and payment service providers in Cambodia.
In the same study, we can observe that slightly over 2 in every 3 Cambodian respondents (65.09%) were already aware of Bakong. Moreover, almost 1 in every 4 Cambodians (23.53%) have already downloaded and used the platform.
Benefits of Using Bakong
The most significant benefits of Bakong are cost savings and user inclusiveness. By consolidating banking operations under Bakong, interbank transaction costs and fees are lowered to a bare minimum, while end-user transactions are free.
Bakong also increases user inclusiveness by aiding in people’s integration into the financial system. Users are encouraged to engage and contribute to the system using simple digital tools with low transaction fees. Payments become as simple as scanning a QR code depending on the amount transacted, and user verification may be accomplished by SMS.
In an interview with Nikkei, the director general of NBC said that many Cambodian women looking for job opportunities migrate to Malaysia from Cambodia. With the cross-border deployment of Bakong, these women could send money back home while reducing the loss of funds to transaction fees while achieving financial independence during the payment.
3 Benefits of Investing in Cryptocurrency for Cambodians
Low Fees and Quick Transactions
One of the key advantages of investing in cryptocurrency is that it generally has lower transaction fees than other types of transactions, such as transferring money through banks or other financial institutions. Additionally, cryptocurrency transactions are usually faster than traditional methods since they are not subject to the same level of regulation and verification processes as traditional methods. This means that funds can be sent quickly and securely without waiting for clearance from multiple parties.
Another major benefit of investing in cryptocurrency is the improved security it provides. Cryptocurrency payments are secured by cryptography, which means they cannot be spoofed or reversed like traditional credit card payments can be. This makes them much more difficult for hackers to steal or manipulate, reducing the risk that funds will be lost due to fraud or theft. Additionally, most cryptocurrencies use decentralized networks, further increasing their security and making them less vulnerable to attacks from malicious actors.
Finally, investing in cryptocurrency provides investors with high liquidity compared to other forms of investment, such as stocks or bonds. Since most cryptocurrencies are traded on open markets, buyers and sellers can quickly convert their holdings into cash without waiting for long periods like they would with traditional investments. This makes it easier for investors to access their funds whenever needed without worrying about waiting periods or hidden fees associated with selling assets on the secondary market.
3 Risks Associated with Using Cryptocurrency in Cambodia
The legal framework for cryptocurrencies in Cambodia is still a work in progress. Currently, there are no specific laws or regulations regarding the use of cryptocurrencies. However, the National Bank of Cambodia (NBC) has warned about potential risks associated with investing in digital assets such as cryptocurrencies. NBC also states that it does not recognize virtual currency as a legal tender or monetary instrument. As such, transactions related to cryptocurrencies are not considered valid under Cambodian law.
If you’re going to get into cryptocurrency, there are some things you should know about the risks involved. These include:
Cryptocurrencies are known to be highly volatile due to their speculative nature, which means their value can fluctuate dramatically over short periods. This makes it difficult to predict and plan when to invest or make payments with them.
Lack of Regulatory Oversight
With no clear legal framework governing cryptocurrency activities, there is little oversight into how these digital assets are handled by users or exchanges trading them. This means that users may be exposed to scams and frauds without having any recourse from authorities if something goes wrong.
As mentioned earlier, cryptocurrency transactions are not considered valid under Cambodian law so any profits made through their use may not be subject to taxation. This could lead to complications down the line if issues arise when attempting to declare taxes on these earnings later on.
What does the future hold for cryptocurrency in Cambodia?
It’s hard to say what the future holds for cryptocurrency in Cambodia at this point, as things are still very much in flux. However, it seems likely that the government will continue its cautious approach regarding regulation. It’s also possible that if the CBDC project goes ahead as planned, it could open up new opportunities for businesses looking to take advantage of cryptocurrencies and blockchain technology.
The country has already seen an influx of foreign investors looking to capitalize on the nascent industry, which may eventually lead to increased regulation and acceptance within the country’s financial sector. Additionally, given its proximity to other Asian countries that have already embraced cryptocurrencies, such as Thailand and Japan, it seems likely that Cambodia will follow suit in due time.
Cryptocurrency has quickly become one of the most talked about topics around the globe—including in Cambodia—over recent years. Despite an initial ban on cryptocurrency-related activities imposed by NBC in 2019, it appears that attitudes towards digital currencies are shifting for the better in this Southeast Asian nation.
With increased investment from abroad and progressive legislation from other countries nearby, it’s only a matter of time before we see real progress in the adoption of cryptocurrencies in Cambodia.
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