Central Bank Digital Currency (CBDC) Set to Become Legal Money in Nepal

Nepal is taking a major step toward recognizing digital money issued by its central bank, while maintaining a strict stance against private cryptocurrencies. A proposed amendment bill to the Nepal Rastra Bank Act, 2058 seeks to give official legal status to Central Bank Digital Currency (CBDC), classifying it alongside traditional paper notes and physical coins.

The scope and legal boundaries of digital money were discussed during a clause-by-clause review of the bill by the Finance Committee of the House of Representatives. Officials clarified that the term "digital currency" in the new law applies strictly to money issued, regulated, and backed by Nepal Rastra Bank (NRB), the nation's central bank. In contrast, privately issued digital assets, such as cryptocurrencies and virtual currencies, will not be recognized as official currency or legal money.

Addressing lawmakers, NRB Executive Director Deergha Rawal explained that incorporating digital currency into the Act specifically enables the launch and management of a central bank digital currency. He noted that private cryptocurrencies do not belong in the central banking law, as regulatory concerns surrounding them are already covered under anti-money laundering legislation.

Finance Secretary Dr. Ghanashyam Upadhyay emphasized the distinction between digital currency and digital banking, advising that they should not be conflated. Because digital currency naturally functions within its own operational framework, he noted that adding a separate operational system definition is unnecessary. To ensure clarity, he suggested defining digital currency simply as any digital money issued or designated by the central bank, which maintains sole authority over official currency.

Under the proposed amendment to Section 2 of the Act, the definition of "currency" will be officially expanded. While the current law recognizes only paper banknotes and metal coins, the updated provision will define currency to include bank notes in active circulation, coins, and digital currency issued directly by the central bank. Proposers of the amendment further recommended explicit language stating that any private virtual currency or cryptocurrency remains strictly excluded from being considered lawful money under the Act.