Indian Finance Minister Nirmala Sitharaman announced on Tuesday that its central bank will launch a digital version of its currency in the next fiscal year 2022-23 which starts on April 1.
The southern neighbor is expected to be one of the biggest economies to introduce a central bank digital currency while Nepal’s other neighbour, China, has already started trials for its digital currency in various cities.
Although Nepal still has a long way to go before launching such a currency, it has launched a study to potentially introduce a digital currency in the future.
Nepal Rastra Bank has initiated the study in line with the monetary policy for the current financial year 2021-22 which states that a feasibility study for a central bank digital currency in Nepal will be conducted as part of global studies ongoing regarding use and feasibility. of digital currency.
“A task force led by a bank manager is working on preparing a concept note on the feasibility of introducing central bank digital currency in Nepal,” said Revati Prasad Nepal, Executive Director of the Department of central bank currency management. “We expect the task force’s report within the next two weeks.”
Nepal said it could not talk about the possibility of introducing central bank digital currency immediately, at least until the task force delivers its report. “We are in no rush to introduce such a currency. We will also observe the reactions to the digital currency that will be introduced in India and elsewhere before making a final decision.
He expects it to take at least 2-3 years before the country introduces the digital currency.
Apart from the technical committee led by the director, the central bank has also formed a steering committee led by Deputy Governor Bam Bahadur Mishra to make necessary recommendations regarding digital currency after discussing the concept note, according to bank officials. central.
“If Nepal decides to introduce central bank digital currency, we need to amend the Nepalese Rastra Bank law allowing it to issue digital currency as well,” Nepal said.
A central bank digital currency is legal tender issued by a central bank in digital form. It is the same as fiat currency and is exchangeable with fiat currency. Only its shape is different.
Even though different types of digital currency, including cryptocurrencies like Bitcoin, have been in use for several years, most countries are in the early stages of central bank digital currency development.
A 2021 Bank for International Settlements survey of central banks found that 86% were actively researching the potential of central bank digital currencies, 60% were experimenting with the technology, and 14% were rolling out pilot projects.
China is at the forefront of introducing central bank digital currency as it has been testing the digital yuan in Chinese cities for two years as it prepares for a nationwide rollout that could place the China ahead of Europe and the United States.
As the world moves towards digitizing everything, the importance of digital currency is increasingly felt across the world. Also in Nepal, there has been a surge in the use of digital payment methods in recent years.
According to central bank statistics, Nepalis carried out banking transactions worth Rs. rupees in mid-December 2020.
Similarly, there were transactions worth Rs 15.52 billion through digital wallet companies in mid-December 2021 of this fiscal year compared to Rs 8.98 billion in mid-December 2020. There has also been a substantial increase in banking transactions through other digital mediums, according to central bank statistics.
“As people increasingly prefer the digital medium of banking transactions, there is a risk that people will buy the virtual currencies developed by the private sector whose role could be disruptive,” said Prakash Kumar Shrestha, head of the department. economic research. “Therefore, thought had to be given to introducing a central bank digital currency in Nepal as well.”
Nepal has not legalized the use of virtual currency or cryptocurrency. The central bank said in a notice last week that it had been informed that people had been tricked into investing in virtual currency-related hyperfunds and engaging in network marketing related to virtual currencies such as Jocial. , Crowd 1 and Solemax Global.
The central bank also warned against legal action against those involved in such activities.
On January 25, the Tax Investigation Department registered a case in the Kathmandu District Court against four people charged with misappropriation of currency amounting to Rs 376.41 million for illegally investing in virtual currencies. “People are investing in virtual currencies, but the security of their investments is uncertain,” Shrestha said.