Uncategorized December 11, 2022
The recent outcry over the use of cryptocurrencies in Nepal has given those of us interested in digital transformation and innovation plenty to chew on. A few weeks ago, Nepal Rastra Bank (NRB) published a policy prohibiting all Nepalese nationals from buying or investing in cryptocurrencies. This was no surprise given the NRA`s previous statements. Another plausible problem is that cryptocurrencies, with their enforcement challenges and lower transaction costs, have democratized some illegal acts. In other words, regulators might be worried because you no longer need to be a powerful player with large sums of money and know how to hire expensive lawyers in the British Virgin Islands to engage in capital flight. Any moderately wealthy Nepalese family that knows a few kids who are good with technology now has access to the same gray financial services that only the very powerful had before. Such a case would worry regulators because so few people are in the first category, many are in the second. Russia has a volatile association with cryptocurrency, made even more complicated by its ongoing invasion of Ukraine. El Salvador was the first country to make it legal tender in September 2021, followed by the Central African Republic in April this year. Experts have now proposed concrete steps to move forward, including the preparation of a legal framework for digital currency. “There are proposals for technical and economic issues that need to be considered,” the NRA official said.
Nepal`s tech regulator, the Nepal Telecommunications Authority (NTA), on Monday issued a notice warning the public about illegal activities, particularly the naming of cryptocurrency, bitcoin and online gambling. The government has focused its efforts on disrupting the network based on secondary research and monitoring transactions through financial channels. Nepal Rastra Bank, the country`s central bank, has asked banks to provide the transaction history of customers who have withdrawn or deposited more than Rs 7 lakhs in cash. In the last six months, a large number of people will have withdrawn or deposited such an amount. It`s like looking for a needle in a haystack when it comes to analyzing individual trades and finding crypto investors. This is a classic example of a government working hard, but not smart enough because people will always find a way around regulations that have been poorly drafted and enforced. Different types of digital currencies, including decentralized cryptocurrencies such as Bitcoin, have been circulating for years. However, most governments are in the early stages of developing state-issued digital currencies. According to a survey published in 2021 by the Bank for International Settlements, 86% of central banks have studied the potential of CBDCs, 60% have experimented with the technology, and only 14% have deployed pilot projects.
The study on this topic was announced with the NRA`s 2021-22 monetary policy paper. A team led by Revati Nepal suggested that before developing the CBDC, the regulator needed to put in place the legal provisions that would allow it to implement it. This is the first part of a two-part series on cryptocurrencies. The second part will be published in March. On September 24, the PBoC went even further by banning cryptocurrency transactions in the country. The growing adoption of cryptocurrencies has led to a reluctance of humanity to use fiat currency, as the latter forces them to pay additional service chargers to intermediaries for their services. Unlike fiat currency, cryptocurrencies include cheaper and faster money transfers and decentralized systems that don`t collapse at a single point of failure. In addition, crypto activists believe that by replacing centralized fiat currency with all cryptocurrencies, it will be easier for a country to get rid of corruption. They see it as a form of political and social activism. The Nepal Telecommunications Authority has issued a warning that cryptographic activities are illegal.
The regulator stressed that websites, applications and online networks related to cryptographic activities cannot be used, operated or managed in the country. Although holding or trading cryptocurrency assets is not yet banned in Kosovo, the government announced a ban on cryptocurrency mining in early January, blaming a growing energy crisis. The country, which unilaterally declared independence in 2008, is facing historic power shortages as planned blackouts are now being implemented to save energy. In another attempt to reduce energy waste, Economy Minister Atrane Rizvanolli announced a long-term ban on crypto mining in the country. Police have been tasked with enforcing the ban and locating mining sites across the country. The State Bank of Vietnam has said that issuing, delivering and using Bitcoin and other cryptos as a means of payment is illegal and subject to fines ranging from VND 150 million (€5,600) to VND 200 million (€7,445). While crypto is widely criticized for its volatility, its use in nefarious transactions, and for the exorbitant use of electricity for mining, crypto is seen by some, especially in developing countries, as a safe haven during economic storms. In July, the attorney general announced a new bill that would allow police to confiscate cryptos deemed to be acquired illegally, citing their use in corruption. The Nepalese government has stated that the recent decline in remittances is due to investments in cryptocurrency. The argument is supported by the fact that foreign exchange reserves are decreasing, but this is not enough to prove that it is related to crypto investments.