Kathmandu. Preparations are underway to legalize digital currency. KATHMANDU — The Ministry of Finance has published a draft bill to amend the Nepal Rastra Bank Act.
The proposed amendment seeks to include digital or virtual currency in the definition of currency for the first time. This is expected to pave the way for the central bank to issue digital currencies in the future.
Likewise, a provision has been proposed to define the bank operating through digital medium as legal and license and regulate it from Nepal Rastra Bank. It is seen as a policy transformation towards a digital financial system.
Prior to this, Nepal Rastra Bank (NRB) in the fiscal year 2078. It had announced the feasibility study of digital currency (CBDC) through the Monetary Policy of 1979. Pointing out that the existing Nepal Rastra Bank Act, 2058 BS prohibits the issuance of currency other than currency notes and coins, a study committee had concluded that amendment to the law was inevitable. The committee has suggested conducting a detailed study on the technical infrastructure, cost, security structure and the level of public trust before the implementation of the digital currency.
Economists have argued that the implementation of digital currency will reduce the annual cost of printing physical notes, increase cashless transactions and improve financial transparency. The digital system is expected to help control tax evasion, illegal cash transactions and money laundering. The government social security allowance or subsidy can be distributed directly through digital wallets, which will reduce leakage in between.
But the challenges are equally serious. Uneven development of digital infrastructure, limited financial literacy, cybersecurity risks and questions of data privacy can complicate implementation. The central bank has indicated that it will move towards a ‘less cashless’ system in a phased manner, making it clear that a completely cashless society is not possible immediately.
Legal clarity, technical preparation, and widespread public awareness are essential for the successful implementation of digital currency. The draft of the bill, which has now been released, has ushered the debate around digital currencies into a formal legal framework.
If the amendment is passed, Nepal will also enter the path of issuing a central bank digital currency. This is expected to usher in a new phase in the country’s financial system.
