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August 7, 2022

Nepal prepares digital currency regulations

The Nepal Rastra Bank (NRB) is prepared with amendments to the statute governing its powers and duties that would let the monetary authority issue a digital currency of the Nepalese rupee, the country’s fiat currency. The announcement follows the conclusion of research indicating a central bank digital currency (CBDC) initiative is possible.

According to Revati Nepal, head of the bank’s Currency Management Department, an amendment bill has been developed by a task group. Sunday’s Kathmandu Post cited him as saying, “After internal deliberations, we’ll transmit the bill to the government for introduction in parliament.” Beginning in 2002, the Nepal Rastra Bank Act will be amended.

The research was revealed in the Monetary Policy 2021-22 document by the NRB. A committee led by Revati Nepal recommended that, prior to constructing the CBDC, the regulator should enact the legislative measures necessary for its implementation.

Now, the experts have offered tangible actions for moving forward, including the establishment of a legal framework for digital currency. The NRB representative said that there are proposals for technical and economic aspects to address.

The central bank aims to establish a separate digital wallet for the CBDC to facilitate digital banking transactions. Nepal explained, “Measures will also be made to investigate interoperability with digital payment service providers.”

Diverse forms of digital currency, including decentralized cryptocurrencies such as bitcoin, have been in circulation for years. However, most governments are still in the early phases of establishing digital currencies issued by the state.

According to a report conducted by the Bank for International Settlements in 2021, 86% of central banks were investigating the possibilities of CBDCs, 60% were experimenting with the technology, and 14% were establishing trial programs.

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Nepal has a long way to go, but the NRB’s investigation has generated a concept paper that is being reviewed by the bank. “We will determine the next steps after the completion of current conversations,” Revati Nepal said.

The head of the central bank’s economic research department, Prakash Kumar Shrestha, stated that it would be beneficial for Nepal to adopt digital money using technologies obtained from other countries. He also emphasized the necessity to pay close attention to cybersecurity and other crucial issues.