KATHMANDU, April 5: Nepal Rastra Bank (NRB) has termed the use of cryptocurrency ‘financially risky’ and continues its ban over the use of the virtual financial instrument.
Unveiling its study report on the ‘Cryptocurrency Risk Assessment’ on Tuesday, the central bank has carried on with its restrictions over use of the related financial instruments.
"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. The NRB further states that a ban on cryptocurrency is necessary as it is subjected to 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 people involved in such transactions, but also to the financial stability of the country. The central bank has imposed a ban on cryptocurrency citing the provision of Section 12 of the Foreign Exchange (Regulation) Act, 2019 BS.
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Although people supporting cryptocurrency take it as a form of currency, no sovereign nation has ever considered issuing cryptocurrency in their monetary system, added NRB.
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. About 450 types of cryptocurrency are being exchanged globally.
In the past few years, investments in cryptocurrencies have skyrocketed across the world and also in the Indian market. The number of investors has also increased, citing the quick and easy return made on crypto investments.
So far, governments of the US, European Union, Canada, Australia have recognized the transactions of Bitcoin. However, the NRB has been issuing public notices time and again 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," the report further states.
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, many 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.
