-Dipti Ghimire
Ms. Ghimire is a research intern at Samriddhi Foundation, an economic policy think tank based in Kathmandu. The views expressed in this article are the author’s own and do not represent the views of the organization. Author can be reached at Dipti Ghimire [email protected].
On August 13, 2017, the Government of Nepal made a decisive move by announcing a nationwide ban on Bitcoin, citing Clause 12 of the Foreign Exchange (Regulation) Act, 2019 BS as its legal foundation. Fast forward to January 23, 2022, the Nepal Rastra Bank (NRB) doubled down on this stance by declaring all activities related to Virtual Currency, Cryptocurrency, and Network Marketing illegal resulting in multiple arrests. While these government actions were driven by valid concerns about fraud, illicit activities, foreign reserves, remittance outflows, and tax revenue, it’s essential to recognize that such stringent measures can impede innovation and entrepreneurship.This decision, seemingly made without a thorough understanding of the subject, lays the groundwork for missed opportunities and inhibited growth in Nepal’s financial and technological landscape.
History offers several examples where the Nepali government’s lack of research and reluctance to proactively adapt to new technologies hindered innovation. A striking parallel can be drawn from the past, when private radio stations were not allowed to operate as the government believed these stations posed a threat to national security and unity. Yet, after mounting pressure from the media and civil society, a significant turning point occurred in 1993 when a new broadcast act was passed, allowing private radio stations to operate legally. Another contemporary example that mirrors this pattern of resistance to innovation is the case of ride-sharing platforms like Tootle and Pathao. When these platforms disrupted the transportation market, the Department of Transport Management hastily declared them illegal, a move reminiscent of the ban on cryptocurrencies like Bitcoin.
The question of legalizing cryptocurrency is undeniably complex, influenced by a multitude of factors. On one hand, it is entwined with concerns related to financial stability, the protection of consumers, the prevention of money laundering, and the curbing of terrorist financing. However, on the other hand, it holds the promise of increased financial freedom, greater inclusion, reduced corruption, and enhanced innovation.
To capitalize on this potential, the government must come up with well-grounded regulations before the bandwagon passes by. Instead of entirely shutting the door on cryptocurrency, the Nepali government should conduct more in-depth research by analyzing the existing knowledge and infrastructure, exploring the use of cryptocurrencies within the context of Nepal’s demographics, literacy rates, and economic status. Engaging in discussions, conducting a cost-benefit analysis with financial experts, technology specialists, and policymakers would provide a more comprehensive understanding of the potential benefits and address the concerns when it comes to cryptocurrency adoption in Nepal.
It’s abundantly clear that it’s high time for Nepal’s government to embrace the ever-evolving financial landscape. Outdated and conservative regulations that no longer align with today’s dynamic financial environment need to be reformed. Hesitating to adopt new technology not only signifies resistance to progress but also carries the risk of Nepal falling behind in the global race for economic and technological advancement. Nepal has the opportunity to create regulatory frameworks that govern the use of new financial technologies and promote their responsible adoption within its economy. Learning from our SAARC neighbors, such as India, Bhutan, and the Maldives, which have embraced cryptocurrency, can provide invaluable insights and experiences to shape Nepal’s approach to modernizing its financial sector.