Cambodia -- Securities Classification Regulatory Overview

Cambodia's approach to cryptocurrency is generally restrictive, and its regulatory framework for classifying crypto tokens as securities is primarily informed by its overarching prohibition on most decentralized cryptocurrencies. While there isn't a detailed, "Howey-equivalent" test specifically articulated for unauthorized crypto assets, the Securities and Exchange Regulator of Cambodia (SECC) applies the principles of its existing securities law to assets it does regulate, such as tokenized traditional securities.

Overall Stance on Cryptocurrencies

The National Bank of Cambodia (NBC) and the Securities and Exchange Regulator of Cambodia (SECC), along with the General-Commissariat of National Police, issued a Joint Public Statement on the Illegality of Cryptocurrencies on June 11, 2018. This statement declared all activities related to cryptocurrencies (such as trading, buying, selling, and clearing) as illegal in Cambodia.

However, it's crucial to distinguish this from the NBC's successful development and implementation of Project Bakong, a blockchain-based central bank digital currency (CBDC) system designed for interbank transactions and payments. Bakong operates within a regulated framework and is a stark contrast to decentralized cryptocurrencies.

Legal Test Used (Howey Test Equivalent)

Given the general prohibition on most cryptocurrencies, a specific, publicly detailed "Howey-equivalent" test for classifying private, decentralized crypto tokens as securities has not been fully developed or explicitly articulated. The SECC's focus has been on enforcing the prohibition.

However, if the SECC were to regulate a digital asset offering, it would likely apply the definition of "securities" as laid out in the Law on the Issuance and Trading of Non-Government Securities (Securities Law), last updated in 2007 (with subsequent prakas and sub-decrees).

Under this law, "securities" are generally defined to include:

• Shares
• Bonds
• Derivative securities
• Investment contracts
• Units in collective investment schemes
• Any other instruments specified by the SECC

The most relevant category for many crypto tokens would be "investment contracts." While not explicitly named "Howey," the underlying principles are highly similar to international standards:

1. Investment of Money (or assets with monetary value): A person provides value.
2. In a Common Enterprise: The investor's fortunes are linked to the success or failure of the enterprise.
3. With an Expectation of Profit: The investor anticipates financial gain.
4. Derived from the Efforts of Others: The profits are primarily generated through the managerial or entrepreneurial efforts of the issuer or a third party, rather than the investor's own efforts.

Therefore, any digital asset that pools funds for a project with an expectation of profit from the efforts of others would likely be considered an "investment contract" and thus a security under Cambodian law, if it were to be permitted for issuance.

Which Tokens Are Considered Securities

Under Cambodia's current framework:

1. Explicitly Regulated Digital Securities: Any digital asset that represents a traditional security (e.g., tokenized shares, tokenized bonds) and is authorized and regulated by the SECC. These are considered securities by definition and must comply with all securities laws. The SECC has shown openness to tokenized traditional assets issued within its regulatory purview.
2. Prohibited Decentralized Cryptocurrencies: Most decentralized cryptocurrencies (like Bitcoin, Ethereum, etc.) are currently considered illegal for trading and issuance in Cambodia, as per the 2018 Joint Statement. While not explicitly classified as "securities" for regulatory purposes (because they're outright banned), if they were to be allowed, many would likely fall under the "investment contract" definition due to their characteristics (speculative investment, expectation of profit from developers' efforts).
3. Utility Tokens (with investment features): If a utility token is marketed with an expectation of profit, appreciation, or provides governance rights that have economic value tied to the success of an underlying project driven by an issuer, it would likely be considered a security if it were to be issued legally.
4. Security Token Offerings (STOs): If permitted, STOs (which are explicitly designed to represent ownership in an underlying asset or revenue stream) would inherently be classified as securities.

Registration/Exemption Requirements for Token Issuers

For authorized digital assets that are classified as securities (e.g., tokenized bonds or shares):

• Registration: Issuers must be licensed by the SECC and obtain specific approval for their offering. This involves submitting detailed disclosure documents, a prospectus, and financial information, similar to traditional securities offerings.
• Compliance: Issuers must comply with all relevant provisions of the Securities Law and SECC regulations, including reporting obligations, corporate governance, and investor protection measures.
• Exemptions: General exemptions from registration might apply for certain types of offerings, such as private placements to sophisticated investors or small offerings, as defined in SECC regulations, but these would apply to the underlying security, not specifically to its tokenized form. There are no specific "crypto-token" exemptions.

For prohibited decentralized crypto tokens:

• There are no registration requirements because their issuance and trading are declared illegal. Any attempt to issue such tokens would be in violation of the 2018 Joint Statement.

Secondary Trading Rules

For authorized digital assets that are classified as securities:

• Regulated Exchanges: Secondary trading must occur on a regulated exchange licensed by the SECC (e.g., the Cambodia Securities Exchange, or a specific Digital Asset Exchange if and when one is licensed for such products).
• Market Integrity: Trading activities would be subject to rules against market manipulation, insider trading, and other illicit practices, with robust clearing and settlement procedures.
• Investor Protection: Exchanges and brokers involved in trading must adhere to investor protection rules, including disclosure of risks and know-your-customer (KYC) / anti-money laundering (AML) / combating the financing of terrorism (CFT) procedures.

For prohibited decentralized crypto tokens:

• No Legal Secondary Trading: There are no legal secondary trading rules because the trading of such cryptocurrencies is deemed illegal in Cambodia as per the 2018 Joint Statement. Any trading would occur outside the regulated financial system and carry significant legal risks for participants.

Enforcement Examples

Enforcement in Cambodia regarding unauthorized cryptocurrencies primarily stems from the 2018 Joint Public Statement on the Illegality of Cryptocurrencies.

• Public Warnings and Prohibition: The most significant enforcement action has been the general prohibition itself and repeated public warnings from the NBC and SECC. These warnings aim to prevent individuals and businesses from engaging in crypto-related activities, making further explicit enforcement cases for securities classification less necessary given the broader ban.
• Investigations and Shutdowns: While specific details on successful prosecutions are less publicly available, Cambodian authorities have stated their intent to investigate and take action against individuals and entities involved in illegal cryptocurrency operations. This often involves collaborating with law enforcement to identify and shut down platforms or schemes.
• Focus on AML/CFT: Beyond the securities aspect, the NBC and financial intelligence unit (FIU) would also enforce the Law on Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT Law) against any use of cryptocurrencies for illicit financial activities, irrespective of their securities classification.
• Fraud Cases: Any crypto-related scam or fraudulent scheme would be prosecuted under general criminal laws concerning fraud, rather than specific securities law violations related to token classification, due to the overarching illegality of the assets themselves.

Specific Legislation and Regulatory Guidance URLs

It's challenging to provide direct, stable URLs for every single prakas or sub-decree as government websites can vary. However, here are the key institutions and their main portals, which you can use to search for the relevant documents:

• Securities and Exchange Regulator of Cambodia (SECC):

  • Official Website: https://www.secc.gov.kh/
  • Note: You would need to navigate this site to find the Law on the Issuance and Trading of Non-Government Securities and related Prakas (regulations) and circulars. The English version of the laws might be found under "Regulations" or "Laws."

• National Bank of Cambodia (NBC):

  • Official Website: https://www.nbc.gov.kh/
  • Note: Look for press releases, circulars, and information related to financial stability, AML/CFT, and Project Bakong.

• Joint Public Statement (June 11, 2018):

  • While a direct, permanent URL from an official source can be hard to find for historical statements, news outlets widely reported it. You can find references by searching "Cambodia Joint Public Statement Illegality of Cryptocurrencies 2018."

• Law on Anti-Money Laundering and Combating the Financing of Terrorism:

  • This law is foundational for financial crime prevention. You would typically find it on the Council of Ministers' website or the General Secretariat of the National Council for AML/CFT.

Disclaimer: Cryptocurrency regulations are dynamic and subject to change. It is crucial to consult with Cambodian legal professionals for the most up-to-date and specific advice.