Cambodia may not grab the headlines as a blockchain hub, but the Southeast Asian nation has been quietly growing its blockchain-based payments system for five years. It has now issued new regulations that outline how banks can handle stablecoins and tokenized assets.
In China, the city of Guangzhou is reigniting residents’ interest in the digital yuan, launching an action plan to promote the People’s Bank of China’s (PBoC) central bank digital currency (CBDC) in public sector salaries, the metro system, and more.
Cambodia quietly advances blockchain framework
The National Bank of Cambodia (NBC) published a new legal framework for the country’s banking system, outlining how it can interact with digital assets.
NBC’s new law permits banks and other payment service providers to deal directly with pre-qualified stablecoins and tokenized assets, but they must first obtain the watchdog’s green light. While multiple banks have been exploring tokenization, this is the first time the regulator has explicitly legalized the sector.
However, the new framework bars banks from issuing digital assets themselves. It also imposes strict regulations on virtual asset service providers (VASPs) regarding services like custody and trading, although these practices are not completely banned.
The new framework aligns with the Basel Committee’s guidelines, which broadly define digital assets into two distinct categories: those that represent traditional financial instruments and assets, such as tokens or value-referenced stablecoins, and the unbacked digital assets. The Committee recommends that banks should limit their exposure to the former while completely refraining from the latter. The classification came under criticism from the global financial industry, which argued that the recommendations disincentivize banks from adopting blockchain.
Still, the new framework is a significant stride for Cambodia’s digital asset sector. In addition to boosting adoption among banks and payment firms, it allows lenders to serve the VASPs offering digital asset services. In several jurisdictions, VASPs continue to be discriminated against as high-risk businesses by the banking sector.
The framework is yet another milestone for a country that has undergone a blockchain revolution over the past five years. In 2020, it launched Bakong, a blockchain-based payment system akin to tokenized commercial bank deposits of the local riel and the United States dollar.
Bakong has rapidly grown over the years, enrolling every other local payment service and expanding to international payments. By Q4 last year, two in three Cambodians were using Bakong.
Cambodia’s neighbors Thailand and Vietnam are digital asset hotspots. The former launched digital asset spot exchange-traded funds (ETFs) last year and continues to record rapid adoption, ranking 16th globally in the Chainalysis adoption index last year. Vietnam’s rise has been even more meteoric and ranked fifth last year, down from third the year prior.
Guangzhou’s new action plan to boost digital yuan adoption
In China, the southern city of Guangzhou has launched an action plan to boost the adoption of the digital yuan, the country’s CBDC, which has faltered in recent years despite launching with a bang.
The city’s announcement says Guangzhou’s Municipal Financial Work Committee approved the action plan to support the province of Guangdong’s broader adoption push.
The overall objective is to “deepen the existing achievements of the digital RMB pilot work, fully stimulate the vitality of the application of digital RMB in the whole society, and use safe, convenient and stable digital RMB scenarios to serve the real economy and people’s lives.”
The digital yuan has been in the pilot stage for six years now, following a five-year research period that started in 2014. These pilots have now covered every other major city in 17 provinces.
However, over the past 18 months, the rapid adoption push has petered out. Last year, the head of the central bank’s CBDC outfit, a key cog in the digital yuan push, was forced to step down amid allegations of ‘crypto-related’ bribery, dealing another blow to the project.
Regional authorities remain committed to making the digital yuan work. In Guangzhou, the city has launched a new committee to push the CBDC, which will partner with local banks, tech firms, and state-owned enterprises to foster uptake. They will push adoption in key economic sectors, including food, housing, transport, sports, public services, and tourism.
Specific initiatives will include paying some public sector salaries and allowances partially in the digital renminbi, establishing prepaid CBDC supervision platforms to aid in merchant adoption and developing demonstration zones where the residents can be inducted into using the CBDC. Transport, shipping, and port operations will also be targeted to further widen the scope of payments.
Guangzhou also intends to incorporate the digital yuan in cross-border transfers, which has been a big target for the Chinese government. The PBoC is already working with its administrative regions, such as Macau and Hong Kong, to test the cross-border payments. China is also a member of mBridge, which seeks to connect CBDCs among members, which include Thailand and the United Arab Emirates. As the biggest member of BRICS, China will have massive influence in the bloc’s upcoming international payments system, giving the digital yuan yet another avenue for global payments.
Watch: CBDCs are more than just digital money
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