Nepal central bank working on policy amendment for CBDC issuance

The Nepal Rastra Bank (NRB) is looking to get the green light to begin developing a central bank digital currency (CBDC). The central bank says it will soon send an amendment bill that will authorize it to issue a CBDC to the parliament. 

Revati Nepal, chief of the currency management department at the NRB, told local news outlet the Kathmandu Post that a task force formed by the bank has already drafted the bill. 

Majorly, the bill will amend the Nepal Rastra Bank Act 2002, the law backing the central bank’s currency activities. The Act currently only gives the central bank powers to issue banknotes and coins. The proposed amendment will allow the bank to also issue digital currency versions of the Nepalese rupee. 

Without giving a specific timeline, the NRB official stated that the draft bill would be forwarded to parliament immediately after the central bank completes its internal discussions. He also noted that the NRB is not in a hurry to introduce the amendment or even the CBDC. 

“There are suggestions for technical and economic issues to be considered. We don’t want to take the unnecessary risk by rushing into introducing digital currency,” Nepal said. 

The NRB’s economic research department chief, Prakash Kumar Shrestha, added that a CBDC is not a critical need of the country’s payments system. Nepal’s digital payments through various service providers currently fill the role that a digital Nepalese rupee would play. 

In light of this, Nepal intends to take its time to study the performance of the CBDCs of its South Asian neighbors, China and India, before launching its own. 

“For now necessary preparatory works are being undertaken, it is not necessary to mention digital currency in the monetary policy. It will be good for Nepal to introduce digital currency with appropriate technology acquired from other nations,” said Shrestha.

Nepal and digital assets

The Kathmandu Post notes that the new development is coming after the NRB published a study last year stating that launching a digital currency would be feasible in the country. 

While it is exploring a CBDC, Nepal has been hostile to digital assets. Nepal is one of the nine countries globally that has an outright ban on the use of digital currencies, declaring the assets to be “illegal and criminal.” Others include China, Algeria, Bangladesh, Egypt, Iraq, Morocco, Qatar, and Tunisia. 

Nepal has enforced this ban by cracking down on digital assets websites and apps through its technology sector regulator, the Nepal Telecommunications Authority (NTA). The regulator added that any citizens caught transacting with digital assets will be punished by the prevailing laws, according to a Nepal Times report. 

To learn more about central bank digital currencies and some of the design decisions that need to be considered when creating and launching it, read nChain’s CBDC playbook.

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