The much-hyped term ‘cryptocurrency’ remains foreign to many Nepalese. It is also because there is no law in Nepal that directly regulates such a thing. Moreover, cryptocurrency transaction is still legally questionable in Nepal.
So here we will explain what cryptocurrency means as far as Nepalese law is concerned.
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What is cryptocurrency?
Simply put, a cryptocurrency is a cryptographically secured digital or virtual currency, based on the blockchain, making it almost impossible to counterfeit. Blockchain is a distributed database that is shared with the node of computer networks. But some philosophers also say that there is no such thing as a cryptocurrency or a wallet, and it is simply an agreement between the networks over ownership of the currency.
What is Bitcoin?
Bitcoin is one such cryptocurrency, which is highly valued and considered to be one of the most valued currencies in existence. Bitcoin can be received through mining or purchased from cryptocurrency exchanges. Mining is the process by which new Bitcoins come into circulation.
In this process, one has to solve a computer puzzle by downloading software that contains a partial or complete history of transactions that have taken place in his networks. The number of Bitcoins is limited to 21 million coins.
Why are benefits?
The growing adoption of cryptocurrencies has led to a reluctance among mankind to use paper money as the latter obliges them to pay additional service chargers to the intermediary for its services. Unlike paper money, cryptocurrencies involve cheaper and faster money transfers and decentralized systems that don’t collapse at one point. Moreover, crypto activists believe that by replacing centralized paper money 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.
So why is cryptocurrency controversial?
But again, the use of cryptocurrencies is blamed for an increase in criminal activity in society. A report from a crypto asset company estimates that nearly 80% of all initial coin offerings (ICOs) launched in 2017, such as the issuance of new cryptocurrencies, were fraudulent. Moreover, the Bitcoin price fluctuates enormously and many people have lost money as a result. Crypto wallets are difficult to understand and use, and fraudulent transactions are difficult to undo.
What does the Nepalese law say about this?
Cryptocurrency issues were revealed in Nepal after Nepal Rastra Bank issued a notice on August 13, 2017 restricting all Bitcoin transactions in Nepal. However, the opinion has been issued without proper research, legal acceptance and assessment of its implications.
First, the notice only made the Bitcoin transaction illegal, leaving all other cryptocurrency transactions unpunished. This evidence lacks the seriousness of the central bank when it comes to cryptocurrencies.
Secondly, the message was published on the “exchange”. This is where the confusion about Bitcoin lies.
Bitcoin has no central authority to regulate it and is instead a decentralized digital currency that is traded person-to-person and not through banks. It has no issuing or regulating country and these Bitcoins are converted into US dollars simply because dollars are used as an international exchange rate. Proponents of cryptocurrencies argue that due to the decentralization created by Bitcoin, there is a paradigm shift of centralized currency that bypasses a centralized currency exchange middleman, also a major reason for the innovation of cryptocurrencies. Therefore, the verification transaction of Bitcoins by Nepal Rastra Bank under the Foreign Exchange Regulations 1962 is wrong.
In addition, the NRB’s claim that its 1962 legislation already incorporated the concept of Bitcoin, which was in fact introduced in 2009, into its legislation gives ample reason to suspect the central bank’s intent and seriousness.
Finally, when the Nepalese government is prosecuting Bitcoin-related crimes, it has been found to have used various laws. For example, prosecutors in some cases refer to the Nepali Rastra Bank Act in their charges, while others refer to the Banking and Financial Institutions Act. Such inconsistency and unpredictability paint a picture of little understanding of cryptocurrencies among government advocates.