September 7: Nepal Rastra Bank is going to test its digital currency within the current fiscal year. The central bank is going to develop the necessary infrastructure for issuing electronic currency and test it within a certain group.

"Our goal is to test the Central Bank Digital Currency (CBDC) within the current fiscal year by formulating the necessary laws, policies and developing the necessary technical infrastructure," Nepal Rastra Bank's Deputy Spokesperson Dr Dilliram Pokharel said, adding, “We have taken help from the International Finance Corporation (IFC) to this end.”

Nepal Rastra Bank signed an agreement with the IFC last Monday for the setting up a new innovation and testing center known as the Regulatory Sandbox. It is said that new issues will be tested by creating a closed group of certain users through the 'Regulatory Sandbox'. CBDC will be put into public use only after successful testing within the closed group, said Deputy Spokesperson Pokharel.

Due to the interest shown by the general public in digital currency transactions and other countries also started issuing such currency, the central bank started the necessary homework to issue CBDC two years ago. Nepal Rastra Bank has formed a 'Steering Committee' under the coordination of Deputy Governor Bam Bahadur Mishra to advance the work of CBDC. A working group formed by the committee under the coordination of director Anuj Dahal for studying CBDC submitted a feasibility report in the previous year.

Based on the study, the central bank while issuing the monetary policy said that further work will be carried forward regarding the issuance of CBDC. Accordingly, a separate unit has also been created in the Central Bank's Payment System Department.

The feasibility study report conducted by the central bank has mentioned that it is appropriate to proceed with the CBDC project only by building a separate structure and team with the participation of all stakeholders.

In the initial stage, it has been suggested that a small unit can be set up within the Payment System Department or the Information Technology Department of the central bank and the work can be carried forward.

Similarly, the report has suggested to ensure high-level technology with security of data, capacity development of the central bank, detailed feasibility study, adequate legal system, target setting and public awareness before issuing CBDC.

As the economy is gradually transforming from cash to digital, the report states that although electronic currency is necessary, political ownership and public acceptance are equally important for its success.

Central banks around the world have started issuing digital currencies with the increase in public interest in electronic currencies including 'cryptocurrencies' issued by the private sector. Since electronic money issued by the private sector does not have a legal basis or a responsible body, investing in it is considered risky. The electronic currency issued by the central bank is considered safe because it takes responsibility for it.