A task force in Nepal has proposed legal changes allowing the country’s central bank to issue its own digital currency. After a feasibility study, the task force in Nepal has proposed legal changes that will allow it to issue its own digital currency.
Nepal Central Bank Sets the Legal Basis for National Digital Currency
The Nepal Rastra Bank (NRB) is ready with revisions to the law determining its powers and responsibilities that would allow the monetary authority to issue a digital version of the country’s fiat currency, the Nepalese rupee. This news comes after a study that concluded that digital currencies from central banks (CBDCs) are feasible.
According to Revati Nepal, chief of the bank’s Currency Management Department, a task force has already drafted an amendment bill. “After internal discussions, we will send the bill to the government to table it in parliament,” he added, quoted by the Kathmandu Post on Sunday. From 2002, the Nepal Rastra Bank Act will see changes.
The study on the matter was announced with the NRB’s Monetary Policy 2021-22 paper. Revati Nepal, a member of the team that developed the CBDC suggested that the regulator need to establish the legal requirements that allow for its implementation before it can develop it.
Experts have suggested concrete actions to take, which include the creation of a legal framework that will allow for digital currencies. “There are suggestions for technical and economic issues to be considered,” the NRB official said.
Central bank plans to create a digital wallet that could facilitate digital banking transactions. “Measures will also be taken to explore interoperability with the digital payment service providers,” Nepal elaborated.
Kathmandu is not in rush to find out what China and India have done with CBDCs
Executive made clear that Nepal Rastra Bank was not in hurry to create the digital currency. The Himalayan country’s monetary authority wants to observe first how South Asian countries, such as India and China proceed in implementing their CBDCs. Nepal emphasized:
We don’t want to take the unnecessary risk by rushing into introducing digital currency.
The finance minister of Nepal’s southern neighbor, Nirmala Sitharaman, announced in February that the world’s most populous democracy was planning to launch a digital version of its currency during the next financial year, which began on April 1. It is now expected that it will be one of the most populous economies in the world to launch a digital currency. The Reserve Bank of India (RBI), expects to release it by 2023.
Nepal’s other powerful neighbor, China, has been exploring the potential of a CBDC since 2014 and is already conducting trials. The initial launch of the digital Yuan was in 2020. Its first phase took place in Chengdu and Suzhou. In 2021, the tests expanded to include Hainan Province, Shanghai, and other areas. The People’s Bank of China offered athletes and visitors a chance to try the e-CNY currency at the Winter Olympics this year.
Since years, a variety of digital currencies have been available, including bitcoin and decentralized cryptocurrencies. 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 had begun to research the possibilities of CBDCs. 60% of them were already experimenting and 14% were actually deploying pilot programs.
Nepal still has a long way to go but the NRB’s study produced a concept paper which is currently under review at the bank. “We will identify the way forward after the conclusion of ongoing discussions,” said Revati Nepal. “It will be good for Nepal to introduce digital currency with appropriate technology acquired from other nations,” added Prakash Kumar Shrestha, chief of the central bank’s economic research department who pointed to other important aspects that need attention such as cybersecurity.
Are you optimistic that Nepal will be able to compete with other countries in developing a digital currency for its citizens? Please leave your feedback in the comment section.
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