KATHMANDU: Have you heard of some investment that has made people billionaires overnight? Would you be tempted on such an investment? Also, what would be your reaction if someone told you about the similar investment that compelled people to lose all the money overnight and turned a complete upside-down of your entire finances?
Today, the most confronted and debated digital phenomenon known as Cryptocurrency. Cryptocurrency has gained plenty of attention worldwide. But still, confusion is going there. Is it just a scam? Or a reliable investment? A network of computers? or the outlook of money and finances? Back then, Satoshi Nakamoto introduced Cryptocurrency as a global phenomenon. He also implemented “Bitcoin” as open-source code and released it in 2009. Experts estimate that Nakamoto mined around 1 million bitcoins, handing the rest over to software developer Gavin Anderson. Today, Bitcoin is the most popular and invested Cryptocurrency worldwide.
In the context of Nepal, there is invisible trading and mining of cryptocurrencies like Bitcoin, even if it is considered illegal. Nepal Rastra Bank has strictly restricted trading any cryptocurrencies like Bitcoin, Ethereum, Polkadot, Litecoin, etc. The Central Bank has officially declared cryptocurrencies as an illegal form of financial tender. It has cited two laws through “The NRB act of 2058 B.S.” and “The foreign exchange act of 2019 B.S.”.
Furthermore, these laws state that one can have bitcoin and other cryptocurrencies transactions in Nepal or use them as foreign exchange or any other currency. As different cryptocurrencies like Ethereum, Bitcoin, etc., arena aren’t classified as digital currency under the NRB act, the use of the internet on the trading of such transactions is considered illegal.
Records and Present statistics
Despite NRB’S warning, there were different arrest cases encountered in Nepal a few years back. In 2017, the crime investigation Bureau (CIB) arrested two people charged for illegally operating a Bitcoin racket under “Bitsewa Private Limited.” It was a company based on running the business of software development, online technology, and information dissemination.
An official site www.bitsewa.com calling it ”Bitsewa” was also opened as Nepal’s First Bitcoin Company and Digital Assets Exchange. Similarly, police arrested seven more individuals for allegedly being involved in Bitcoins operation in Nepal in the same year. Though crypto like Bitcoin is flourishing worldwide, it is still considered a threat to technologically weaker countries like Nepal.
As per Statista, there were about 900 crypto coins in the market in 2021. Today, there are more than 4000 cryptocurrencies in the world so far. Turkey is one of the countries with the highest rate of cryptocurrency adoption. Similarly, if we talk about Bitcoin trade statistics, approximately there are 200 million Bitcoin in existence. Blockchain.com claims to record a total of 45 million Bitcoin wallets in its database. In a single day, there are 350,000 Bitcoins transactions recorded. We can see an average of 1800 new bitcoins mined through bitcoin mining, and China captures 75% of the Global miming network. Bitcoin occupies the majority of the market cap among all cryptocurrencies. (SOURCE: STATISTA)
Technological Challenges upfront
Cryptocurrency is a decentralized financial transaction operated through software that runs through a distributed network of computers irrespective of running through any centralized financial institution like a Bank. Every crypto transaction is codified into blocks, and it records itself in a public ledger in the form of a “chain of blocks” called Blockchain.
Highly advanced distributed computing software is required to get adopted with crypto transactions. Fetching such rich technology and using it is a tough job for Nepal. As it runs through a decentralized system and in the absence of no person or regulating body would even create more troubles in maintaining and handling technical flaws and disruptions. Thus, Nepal should prove itself on spurring technological aspects to cope up and operate in the crypto space.
Change in financial mindset
The financial landscape of Nepal has been witnessing different changes through the tremendous effort of NRB. From formulations and implementation of Financial literacy framework to developing and practicing methodologies to enhance financial access to people from urban to remote areas, NRB is trying hard enough to provide financial access. If we talk about the majority of the population belonging to urban areas, digitized banking is growing.
When it comes to the interest of the younger people, they are more eager and inclined on easy investment and hassle-free financial services. Cryptocurrencies like Bitcoin are more popular among youths these days. Despite NRB’s restriction, Nepalese also are part of Bitcoin investment in the world derivative market. Those investments are made through their relatives residing abroad. The growing attention on crypto like Bitcoin from Nepalese investors signifies a positive change in financial mindset.
Different Social media are also the triggering factors. But what about the rural population? Of course, some farmers can benefit from cryptocurrencies. The selling of agro-based products online and receiving payments via bitcoins can also be imaginable if NRB allows it. However, for the agro-backed economy like Nepal, crypto-like bitcoin holds.
The Bottom Line
Once Bill gate said, “The future of money is digital currency.”. The statement by billionaire is defiantly powerful, and today Cryptocurrency has set that example as speculative assets cryptocurrencies are flourishing worldwide. With changing times and circumstances, the use of crypto is increasing substantially in different powerful countries. But still, in the case of Nepal, Cryptocurrency is pretty a new concept. Despite numerous drawbacks, technology such as Blockchain can be adopted, bringing immense reform to the financial sector. Though crypto cannot replace fiat currency and macro challenges, digital currencies are seen as a possible exchange of mediums. Country’s forthcoming policies must foresee and prepare for it.
Author: Namrata Khatri, Assistant Manager, ECC/IPS UNIT, Nepal Bank Ltd.