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. New rules have now been issued that describe how the banks can manage stablecoins and tokenized assets.
In China, the city of Guangzhou is rekindling residents’ interest in the digital yuan, launching an action plan to promote the People’s Bank of China (PBoC) the central bank’s digital currency (CBDC) in public sector salaries, the metro system and more.
Cambodia is quietly developing the 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 allows banks and other payment service providers to trade directly with pre-qualified stablecoins and tokenized assets, but they must first get the watchdog’s green light. While several banks have explored tokenizationthis is the first time the regulator has explicitly legalized the sector.
However, the new framework prevents banks from issuing digital assets themselves. It also imposes strict rules on virtual asset providers (VASPs) regarding services such as storage and trading, although these practices are not completely prohibited.
The new framework is consistent with the Basel Committee’s guidelines, which broadly define digital assets into two distinct categories: those representing traditional financial instruments and assets, such as tokens or value-referenced stablecoins, and the unbacked digital assets. The committee recommends that the banks limit their exposure to the former while completely renouncing the latter. The classification came under criticism from the global financial industry, which argued that the recommendations discourage banks from adopting blockchain.
Still, the new framework is a significant step for Cambodia’s digital assets sector. In addition to increasing adoption among banks and payment companies, it allows lenders to serve VASPs that offer digital asset services. In several jurisdictions, VASPs continue to be discriminated against as high-risk businesses by the banking industry.
The framework is yet another milestone for a country that has undergone one blockchain revolution during the last five years. In 2020, that is is launched Bakong, a blockchain-based payment system similar to tokenized commercial bank deposits of the local riel and the US dollar.
Bakong has grown rapidly over the years, registering every other local payment service and expands to international payments. In the fourth quarter of last year, two out of three Cambodians used Bakong.
Cambodia’s neighboring countries Thailand and Vietnam are hotspots for digital assets. The former launched digital asset spot-traded exchange-traded funds (ETFs) last year and continues to see rapid adoption, ranking 16th globally in Adoption index of chain lights last year. Vietnam’s rise has been even more rapid, ranking fifth last year, down from third years earlier.
Guangzhou’s New Action Plan to Increase Digital Yuan Adoption
In China, the southern city of Guangzhou has launched an action plan to increase the adoption of the digital yuanthe country’s CBDC, which has faltered in recent years despite launching with flying colours.
The city’s message says The Guangzhou Municipal Economic Work Committee approved the action plan to support Guangdong Province’s wider adoption.
The overall goal is to “deepen the existing results of the digital RMB pilot work, fully stimulate the vitality of the application of digital RMB throughout 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.
But over the past 18 months, the rapid adoption has slowed. Last year, the head of the central bank’s CBDC outfit, a key cog in the digital yuan, was forced to step down amid allegations of “crypto-related” bribery, deal another blow to the project.
Regional authorities are still engaged in making the digital yuan work. In Guangzhou, the city has launched a new committee to run the CBDC, which will work with local banks, tech companies and state-owned enterprises to promote the spread. They will drive adoption in key economic sectors, including food, housing, transport, sports, public services and tourism.
Specific initiatives will include pay some salaries to the public sector and allowances partially in the digital renminbi, establishing pre-paid CBDC monitoring platforms to help merchant adoption and developing demonstration zones where residents can be initiated into using CBDC. Transport, shipping and port operations will also focus on further broadening the scope of payments.
Guangzhou also intends to incorporate the digital yuan into cross-border transfers, which has been a major goal of the Chinese government. The PBoC is already working with its administrative regions, such as Macau and Hong Kongto test the cross-border payments. China is also a member of mBridgewhich seeks to connect CBDCs among members, which include Thailand and the United Arab Emirates. As the largest member of BRICS, China will have a massive influence in the bloc’s upcoming international payment systemgiving the digital yuan yet another avenue for global payments.
Watch: CBDC is more than just digital money
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