A working group in Nepal has proposed legal changes that would allow the country’s central bank to issue its own digital currency. The measure comes after a study indicated that this initiative is feasible and recommended certain provisions that authorize the regulator to proceed with its implementation.
The Central Bank of Nepal prepares the legal basis for the national digital currency
The Nepal Rastra Bank (NRB) is ready with revisions to the law setting out its powers and responsibilities that would allow the monetary authority to issue a digital version of the country’s fiat currency, the Nepalese rupee. The news follows a study that concludes that a central bank digital currency (CBDC) is a feasible project.
Nepal Rastra Bank (NRB) was established on April 26, 1956, under the Nepal Rastra Bank Act.
According to Revati Nepal, head of the bank’s foreign exchange management department, a working group has already drafted an amendment bill. “After internal discussions, we will send the bill to the government to present it in parliament,” he added, quoted by the Kathmandu Post on Sunday. Changes will be made in Nepal Rastra Bank Act 2002 onwards.
The study on the issue was announced with the NRB’s 2021-22 monetary policy paper. A team led by Revati Nepal suggested that before developing the CBDC, the regulator should introduce the legal provisions that would enable it to implement it.
Experts have now proposed concrete steps forward, including preparing a legal framework for the digital currency. “There are suggestions to consider technical and economic issues,” the NRB official said.
The central bank intends to design a separate digital wallet for the CBDC through which digital banking transactions can be conducted. “Steps will also be taken to explore interoperability with digital payment service providers,” Nepal explained.
Kathmandu is in no rush, it wants to see how China and India are doing with their CBDCs
The executive made it clear that Nepal Rastra Bank is in no rush to issue the digital currency. The Himalayan nation’s monetary authority wants to first observe how neighboring South Asian countries, including India and China, go about introducing their CBDCs. Nepal highlighted:
We don’t want to take the unnecessary risk of adding digital currency.
The finance minister of southern neighbor Nepal, Nirmala Sitharaman, announced in February that the world’s most populous democracy planned to launch a digital version of its currency in the next financial year, which began on April 1 . of the largest economies to introduce a digital currency with the Reserve Bank of India (RBI) expected to implement it in 2023.
Nepal’s other powerful neighbor China has been exploring the potential of a CBDC since 2014 and is already conducting tests. Cities such as Shenzhen, Suzhou and Chengdu became the stage for the initial launch of its digital yuan in 2020. Then the tests were expanded to more regions, such as Hainan province, Shanghai and other cities in 2021. The People’s Bank of China offered athletes and visitors the opportunity to try the CNY electronic currency at this year’s Winter Olympics.
Various types of digital currencies, including decentralized cryptocurrencies such as bitcoin, have been in circulation for years. However, most governments are in the early stages of developing state-issued digital currencies. According to a Bank for International Settlements survey published in 2021, 86% of central banks were investigating the potential of CBDCs, 60% were experimenting with the technology, and only 14% were deploying pilot projects.
Nepal still has a long way to go, but the NRB study produced a concept paper that is currently under review at the bank. “We will identify the way forward after the conclusion of ongoing discussions,” Revati Nepal said. “It will be good for Nepal to introduce digital currency with appropriate technology acquired from other nations,” added Prakash Kumar Shrestha, head of the central bank’s economic research department, who pointed to other important aspects that need attention such as cyber security.
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CBDC, Central Bank, Crypto, Cryptocurrencies, Cryptocurrency, Digital Currency, Digital Rupee, Digital Yuan, Feasibility, Nepal, Nepal Rastra Bank, Nepalese, NRB, Project, Study
Do you think Nepal will catch up with its neighbors in developing a national digital currency? Tell us in the comments section below.
Lubomir Tassev is a tech-savvy Eastern European journalist who likes Hitchens’ line: “Being a writer is what I am, rather than what I do.” In addition to crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.
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