A task force from Nepal has suggested legal changes that would allow the central bank of Nepal to issue its own digital currency. After a study concluded that such an initiative was feasible, the task force in Nepal has proposed legal changes that would allow the regulator to implement it.
The Nepal Rastra Bank (NRB), is working on revisions to the law that will determine its powers and responsibilities. This would enable the monetary authority of Nepal to issue a digital currency version of its fiat currency, the Nepalese Rupee. This news comes after a study that concluded that a digital currency central bank ( CBDC ) was feasible.
Revati Nepal, the chief of the bank’s Currency Management Department, said that a task force had already created an amendment bill. He said, quoted by Kathmandu Post, that “after internal discussions, we will submit the bill to government to table it in Parliament.” The Nepal Rastra Bank Act will be modified starting in 2002.
The NRB’s Monetary Policy 2021-22 paper announced the study. Revati Nepal, a member of the team that developed the CBDC suggested that the regulator need to establish the legal provisions necessary to allow it to be implemented before it can develop it.
Experts have suggested concrete steps for moving forward, including the creation of a legal framework to support the digital currency. The official at the NRB stated that there are technical and economic issues that need to be addressed.
The central bank plans to create a digital wallet that could allow digital banking transactions to be made through the CBDC. Nepal explained that the central bank will take measures to ensure interoperability between digital payment service providers.
Kathmandu not in a rush, wants to see how China and India are doing with their CBDCs
The Nepal Rastra Bank executive stated that they are not in any hurry to issue digital currency. The Himalayan nation’s monetary authority wants to observe how South Asian countries, including India, proceed with their CBDCs. Nepal emphasized:
We don’t want the unneeded risk of rushing to introduce digital currency.
In February, Nirmala Sitharaman (northern Nepali finance minister) announced that the most populous democracy in the world would launch a digital currency. This was to be done during the coming financial year which began April 1. It is now expected that it will be one of the most populous economies to launch a digital currency. The Reserve Bank of India (RBI), expects to roll it out by 2023.
China, Nepal’s powerful neighbor, has been studying the potential for a CBDC from 2014 and is currently conducting trials. In 2020, cities like Chengdu, Suzhou, and Shenzhen were the first to launch the digital currency. In 2021, the tests were expanded to include Hainan province and Shanghai. Visitors and athletes had the opportunity to use the e-CNY currency from the People’s Bank of China at the Winter Olympics.
Since years, a variety of digital currencies have been in use, including decentralized cryptocurrencies such as bitcoin. Most governments are still in the initial stages of creating digital currency issued by their state. A survey done by the Bank for International Settlements in 2021 found that 86% of central banks were investigating the potential of CBDCs. 60% of them were testing the technology, and only 14% were actually deploying pilot projects.
Nepal has a lot of work ahead, but the NRB’s research produced a concept paper that is currently being reviewed by the bank. Revati Nepal said, “We will identify the best way forward after the conclusion to ongoing discussions.” “It will benefit Nepal to introduce digital currencies with the appropriate technology acquired form other countries,” said Prakash Kumar Shrestha (chief of central bank’s economic researcher department), who also pointed out other important aspects that require attention, such as cybersecurity.