We all know about the financial crisis of 2007-2008. It was one of the biggest financial crises we have ever seen. Who is to blame for one of the biggest financial crises in the world? There was always a question mark left after that crisis. What if we have to suffer against the same odds we went through in 2008, that’s where bitcoin came on the scene. The way bitcoin is growing shows that few world leaders, tech giants believe it can be something big after the breakthrough of the internet in the global world.
Why it has a different short of hype among people?
Bitcoin, the first cryptocurrency, could eliminate the need for government guarantees for verification and transactions. You don’t have to wait in line or pass KYC to do any transaction and this could be one reason why people find it more fascinating nowadays.
What is Cryptocurrency?
It is digital money that is decentralized, fully digital, and can store in the distributed public ledger called a blockchain. Like, how we use the internet for information. Nobody has control over it that’s why it’s very popular among people nowadays.
This new form of currency took the world by storm, quickly growing in value as more people got involved with time. It created crypto billionaires and many new cryptocurrencies coming into operation to date. Today, cryptocurrencies are collectively worth trillions of dollars and used to purchase several goods and services, from buying tickets to travel to a slice of pizza.
What is Bitcoin?
Bitcoin is known as a virtual currency or a digital currency. It’s more an online version of cash. It can be said as a digital asset that can be sent through the internet.
However, top companies like MicroStrategy, Tesla, etc are holding a cryptocurrency and even El Salvador a country in Central America bought 400 bitcoins. It brought more people’s attention to the crypto market. The physical Bitcoins you see in photos are just a random creation. If there is no private code printed inside them, they will be useless.
Is it Secure?
Since all transactions are publicly recorded, it is very difficult to copy, fake, or use anything you do not own. You can lose your bitcoin wallet or delete your Bitcoins and lose them forever. There have also been thefts from websites that can store bitcoins remotely. The value of bitcoin has gone up and down over the years since it was created in 2009, and some people don’t think it’s safe to exchange your “real” money for bitcoin.
Is Crypto Legal in Nepal?
Cryptocurrencies are just emerging virtual or digital currencies. You can say cash in digital form. According to the law of Nepal, NRB(Nepal Rastra Bank) banned the crypto under two laws:
- Foreign exchange act 2019
- NRB act of 2058 BS (2002 AD)
- Nepal is still in the developing phase and behind in technology as compared to our neighbor’s country India and China. All of the bitcoin transaction happens digitally and the government has no control on it so on the today context, it is still illegal to trade any sort of cryptocurrencies in Nepal.
- We have always heard about the bad side of bitcoin or any other cryptocurrency as they are created just for illegal activities and turning all the black money into white ones. It is one of the negative sides of crypto and the one reason Nepal not accepting it as a currency here.
- In a country like Nepal, one of the Major ways of generating country revenue is from Tax. If Nepali starts using bitcoin as a currency, it will affect Nepal’s economy as there’s no control of Government authority.
Nobody can predict the crypto market due to its volatility. NRB has to balance the country’s economy. With bitcoin or any other cryptocurrency, it doesn’t seem possible for now to accept it as a currency for the Nepalese Government. IT is one of the reasons for crypto not being legal in Nepal.
How Nepal can make Crypto Legal?
The central bank of digital currency is a digital form of fiat currency, which can be used as legal tender and generated by the country’s central bank. Because it is a digital form, it is different from traditionally issued coins and bills. Similarly, it is different from cashless payment tools like credit cards, debit cards, and electronic payment systems because we have to follow some ground rules of central authority in the case of fiat money.
In the last 4-5 years, digital currency has gained a vast majority of popularity globally. It has caught the eyes of central bankers of Nepal and started to see its benefit. Nepal has to see the benefits of digital currency and should look after CBDC to support its own digital Nepal framework. As neighboring countries like China and India are giving a thought about it and exploring Digital currency. China started to do its research in digital currency back in 2014 and still piloting in different cities of China. India is working to lunch their first digital currency at the end of the year.
The CBDC approach needs to be divided into several stages to build a digital currency. The Nepal Rastra Bank(NRB) also showed great interest and enthusiasm for the central bank’s digital currency. NRB must set up the team to study and explore new and current technologies to build hypothetical digital currencies. Brainstorming sessions, seminars, and digital payment awareness training should be held for researchers, academics, banks, commercial departments, and others interested in this topic to demonstrate the importance of digital currency in the future. Similarly, a feasibility study should is required to investigate the design, economic, regulatory, and technical possibilities to determine how to implement the CBDC framework in Nepal.
Issuing digital currency is significantly cheaper than producing and distributing physical money. It can also be monitored by the central bank, making it easier to track and detect fraud. All over the world, people are increasingly interested in digital currencies. Despite the growing demand for CBDC, several measures still need to be considered to meet the population needs. It takes time to develop a CBDC because each country has its unique criteria that require testing of personalized technical aspects.
On March 10, 2021, eSatya hosted its 18’th meetup on the topic “Crypto Regulations in Nepal”
Mr. Nara Bahadur Thapa, a former NRB officer, talked about how few countries have adopted the use of virtual currencies like Russia and the United States. On the other hand, Nepal has chosen a wait-and-watch method. Nepal has not yet transferred a call for a capital transaction. However, it is likely that blockchain technology will be used to facilitate financial integration through proper awareness and infrastructure development. Blockchain technology has the potential to reduce financial brokerage costs. Similarly, blockchain-based supply chains can help drive the agricultural market in Nepal.
Mr. Thapa is a very research-oriented person, points out some research challenges that we can explore in research. They are:
- The function of money as a matter is how cryptographically implements the storage of medium value of exchange, per-account, and post-payment standards to some extent.
- Nature of Bitcoin: Currently, Bitcoin behaves like a commodity.
- Payment Shift: How can I switch from credit to commodity money from an account-based payment system to a token-based system?
- The role of bank intermediary.
- The fiscal policy role in protecting the stability of the financial sector without LOLR facilities.
- The financial policy.
- Liquidity intervention Currency issues.
- A new paradigm shift that reduces or eliminates the role of central banks with the advent of alternative means of payment and unit of account.
- Macroeconomic stability issues Deflation risk, Business cycle issues Ability to respond to temporary shocks.
These challenges are at the global level. Nepal is waiting for the Global community to solve these problems.
How People are Trading Crypto in Nepal?
Since it is illegal in Nepal, many people are depending on their relatives, friends who are out of the country for some reason. It cannot be done from Nepal because it is illegal here. You can even trade crypto from India using an Indian bank account using a P2P transaction. Many students who are studying abroad have been involved in crypto trading and making money legally.