Cambodia’s central bank has threatened legal action after a Japanese tech firm announced it had the organisation’s backing to set up a cryptocurrency in the country.
The National Bank of Cambodia (NBC) said it had yet to allow the purchase, sale or circulation of any digital or cryptocurrency.
The claim that the NBC was backing the new digital tender led to an angry statement.
“We condemn … any person who used NBC’s name to disseminate such false information, and we are taking legal actions against this,” the central bank said.
Last week, Japan-based Chaintope and Hong Kong’s Digital Agriculture Exchange held a “cooperation signing ceremony” and released a statement to the media.
K-coin “together with Cambodian corporations and the Cambodian Central Bank” was being developed, the firm said, naming Digital Agriculture Exchange as the Cambodian partner.
It claimed K-coin would be used in Cambodia agriculture, with a goal of being adopted by 200,000 employers and reaching an issuable value of US$200 billion.
Agricultural finance remains a critical issue in Cambodia, where low incomes and limited savings mean farmers often borrow small sums at high interest rates to fertilise their plots or to buy simple equipment.
Micro-loans have been blamed for worsening spirals of rural debt.
Cambodian economist Kimty Seng argued that micro-loans were often used for non-productive purchases, like vehicles or household items, rather than generating income to help families pay off debts.
“The fact that borrowers are required to put up their assets as collateral may give financial institutions incentive to offer loans without caring how the loans are to be used,” he wrote for Policy Forum.
“Consequently, indebtedness is one of the major causes of rural land loss in Cambodia, impoverishing low-income borrowers and widening the disparity between the haves and the have-nots.”
It seems unlikely, however, that K-coin is the answer.
Last week’s controversial press release said: “Digital Agriculture Exchange will be able to conduct the issuing and management of K-coin with authorisation from a central bank, and with the central bank providing a constant guarantee of trust.”
The NBC in December wrote to all banks and micro-finance institutions prohibiting the use of any form of cryptocurrency without its approval because of the potential for money-laundering and use by terrorist groups inherent in virtual currencies.
But the firms claimed that the NBC’s cooperation would allow K-coin to overcome problems facing other cryptocurrencies, including bitcoin, which had exploded in value but were impractical for performing many transactions.
Bridget Lau of Digital Agriculture Exchange at the event launch said she had met NBC representatives three times to discuss the situation.
Neither company was available for comment after the NBC announcement and the press release has been removed online.
Cambodia’s rural poverty remains a crushing problem. Picture credit: All Free Photos
