KATHMANDU, April 4: Nepal Rastra Bank (NRB) has unveiled the Cryptocurrency Risk Assessment Report today.
In the report, the country's central bank has concluded that cryptocurrency cannot be brought into use as it would be financially risky. Cryptocurrency transactions are 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 have adverse impact on remittance inflow and create challenges in managing the foreign exchange reserves," reads the report. It states that a ban on cryptocurrency is necessary as it has risks including destabilizing the overall economic balance, risks for financial stability, risk in terms of implementing the monetary policy and risks of fraud and tax evasion, among others.
The NRB stated that transactions in cryptocurrency brought risk not only to the country but also various risks to people involved in such transactions.
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The central bank has imposed a ban on cryptocurrency citing the provision of Section 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.
The NRB stated in the report that there are around 23,000 different cryptocurrencies in use in the world at present and Bitcoin alone occupies 42 percent of the market. It is also stated that there are about 450 cryptocurrency exchanges in the world.
The central bank has been issuing public notices from time to time warning that transaction in cryptocurrency is illegal.
"There is no guarantee or surety of any country or government in cryptocurrency, there is no security and financial intermediary, and it has no other use except for the purpose of bookmaking. This virtual thing is not widely accepted but is issued and used by certain groups for their vested interests," reads the report.
The NRB has described cryptocurrencies as a digital matter that can be transacted as a currency issued by the private sector. Its transaction is illegal in various countries including in Nepal. This 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 doing this job.
People carrying out transactions in cryptocurrency use 'blockchain' or 'distributed ledger' technology for bookkeeping.
Cryptocurrency is mainly obtained through mining and purchasing.
