A Nepalese task force has proposed a legal amendment that would allow the country’s central bank to issue its own digital currency. The move follows a study that showed such a concept was feasible and recommended specific provisions that would give regulators the authority to move forward with its implementation.
Nepal Central Bank prepares legal basis for national digital currency
The Nepal Rastra Bank (NRB) is preparing to amend the law that defines its powers and responsibilities so that the monetary authority can issue a digital version of the Nepalese rupee, the country’s fiat currency. The news follows a study that concluded that the Central Bank Digital Currency (CBDC
According to Revati Nepal, chief of the bank’s Monetary Control Department, a task force has already drafted an amended bill. After internal discussions, we will send the bill to the government for submission to parliament,” he added, quoted by the Kathmandu Post on Sunday, adding that changes will be made to the Nepal Rastra Bank Act starting in 2002.
A study on the matter was released along with the NRB’s Monetary Policy 2021-22 paper. The team led by Levatinepal suggested that before developing a CBDC, regulators need to introduce legal provisions to implement it.
The experts now suggested concrete steps to move ahead, including the preparation of a legal framework for digital currencies.” There are proposals on technical and economic issues that should be considered,” the NRB official said.
The central bank intends to design a separate digital wallet for CBDCs that will allow them to conduct digital banking transactions. Nepal elaborated, “Steps will also be taken to explore interoperability with digital payment service providers.”
Kathmandu is not in a hurry and wants to see what China and India are doing with CBDC.
The executive revealed that Nepal Rastra Bank is in no hurry to issue digital currency. The Himalayan nation’s monetary authority wants to first observe how its South Asian neighbors, including India and China, are doing in implementing CBDC. Nepal stressed.
They do not want to take unnecessary risks by rushing to introduce digital currencies.
Nepal’s southern neighbor, Finance Minister Nirmala Sitharaman, announced in February that the world’s most populous democracy plans to introduce a digital version of its currency during the next fiscal year, which begins April 1. Thus, the Reserve Bank of India (RBI) is expected to roll out the digital currency in 2023, making it one of the largest economies to adopt a digital currency.
Nepal’s other strong neighbor, China, has been exploring the potential of CBDC since 2014 and is already piloting it. Cities such as Shenzhen, Suzhou, and Chengdu were the site of the first launch of its digital yuan in 2020. Testing was then expanded to more regions in 2021, including Hainan Province, Shanghai, and many other cities. The People’s Bank of China offered athletes and tourists the opportunity to test the e-CNY currency at this year’s Winter Olympics.
Digital currencies of various kinds, including decentralized cryptocurrencies like Bitcoin, have been in circulation for years now. 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 are studying the potential of CBDCs, 60% are experimenting with the technology, and only 14% are developing pilot projects were.
Nepal still has a long way to go, but the NRB study has produced a concept paper that is currently under consideration by the bank. Says Revati Nepal, “After the conclusion of the ongoing discussions, we will identify the way forward.” Prakash Kumar Shrestha, head of the central bank’s economic research department, pointed to other important aspects that require attention, such as cybersecurity, adding, “It would be good for Nepal to introduce a digital currency with appropriate technology from other countries.”
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