Nepal Rastra Bank (NRB) has unveiled the Cryptocurrency Risk Assessment Report.
In the Report the country’s central bank has concluded that cryptocurrency cannot be brought into use as transactions in it will be financially risky. Cryptocurrency transaction is banned by the existing laws of Nepal.
“It entails risks as investment in cryptocurrency results in capital flight since the investment is in foreign land, it might hurt remittance flow and create challenges in managing the foreign exchange reserves,” reads the Report. It states that prohibition on cryptocurrency is necessary as it has risks including destabilising the overall economic balance, risk on financial stability, risk in terms of implementing the monetary policy and risks of fraud and tax evasion, among others.
NRB stated that transactions in cryptocurrency brought risk not only to the country but also to the people involved in such transactions.
The central bank has imposed a ban on cryptocurrency as per the provision of Clause 12 of the Foreign Exchange (Regulation) Act, 2019 BS.
People supporting cryptocurrency take it as a form of currency. However, there is no sovereign nation issuing cryptocurrency as in the current monetary system.
NRB stated in the report that there are around 23,000 cryptocurrencies in use in the world at present and Bitcoin alone occupies 42% of its total market. It is also stated that there are about 450 cryptocurrency exchanges in the world.
NRB has been issuing public notice from time to time warning that transaction in cryptocurrency is illegal.
“There is no guarantee of any country or government in cryptocurrency, there is no security and financial intermediary, and it has no other use except for bookmaking. This virtual thing is not widely accepted but is issued and used by certain group for their vested interest,” read the report.
NRB has described cryptocurrency as a digital matter that can be transacted as a currency issued by the private sector. Its transaction is illegal in various countries including Nepal. Virtual currency is issued for carrying out works related to payments without any financial intermediary (central bank or monetary authority issuing currency).
Users connected to the network have themselves maintained accounts of the receipt and expenditure of cryptocurrency for carrying out its transaction. In the existing system, the central banks or financial institutions have been conducting this job.
People carrying out transactions in cryptocurrency use ‘blockchain’ or ‘distributed ledger’ technology for bookkeeping.
Cryptocurrency is mainly obtained through mining and purchasing.
