Blockchain in Nepal: A renewed interest

As the unprecedented impact of Covid-19 continues to devastate global economies, new ideas which were considered not relevant or even illegal are now becoming relevant again. One such area is the technology of blockchain and virtual/crypto currency.

Speaking at the 28th Anniversary of SEBON (Security Board of Nepal), the Finance Minister of Nepal, Dr. Yuvraj Khatiwada,  expressed his views on the relevancy of virtual currency to positively impact Nepal’s economy.

Minister Dr. Khatiwada speaking at the SEBON event (Zoom)

Dr. Khatiwada’s remarks translated from Nepali (please refer to the full video).

“There is a need to continuously disseminate information to the general public regarding new tools brought about by Information Technology like virtual currencies, virtual trends, especially crowd sourcing and cloud sourcing and our own financial instruments ” – Minister Dr. Khatiwada.

He further emphasized the importance of educating the public on these new technologies and urged the financial institutions to coordinate their efforts.

“We need to devise new concepts and thereby segregate and assign pertinent responsibilities  to the Ministry of Finance, Nepal Rastra  Bank, Insurance Board and  Dealers for dissemination of such information to the General Public.” – -Minister Dr. Khatiwada.

Nepal Rastra Bank had declared Bitcoin and other cryptocurrencies as illegal forms of financial tender. This was based on Nepal Rastra Bank Act and the 2019 Foreign Exchange Regulation Act. It is heartening to hear from the Finance Minister himself about the positive effect of these technologies.

Dr. Yuvraj Khatiwada is a renowned economist, who has occupied many important positions in Nepal and internationally. He served as the Vice-Chair of the National Planning Commission (twice), Governor of the Central Bank. He also served as a senior economist for the United Nations on a mission to Sri Lanka for two years. A Minister holding multiple portfolios- Minister of Finance and Minister of Information and Communications, it appears that Dr. Khatiwada is very aware of the impact of technology in all areas of modern development especially in the financial sector.

As Nepal’s two big neighbors (China and India) push to take advantage of the massive positive impact of blockchain technology, it is prudent on Nepal’s Finance Minister’s part to open the discussion on this subject.

The internet created a medium for sharing information and making information almost cost free. Blockchain technology will do the same for value transfer. As an example we can take the case of remittance.  According to the world bank,  “Many banks and money transfer operators charge too much, cutting into the gains of migration,”  Nepal receives over $8 billion through remittance.  As per a World Bank study, the average global cost of remittance fee is 6.7%. For Nepal this amounts to $536 million. The impact of reducing this cost through a technology like blockchain would be huge.

As emphasized by the Minister, financial institutions like the banks, insurance companies and the dealers could play a critical role in the quest for new technology. For any nation, finance is a highly regulated environment. It is hoped that now the financial institutions in Nepal will be open to integrating these new technologies with the blessing from the government. With the combined effort from all, the appropriate environment can be created where blockchain technology can take its roots in Nepal.

It is quite evident that there is much global interest in blockchain technology and crypto currency. This interest is from both nation states and international organizations like OECD and the World Bank. Minister Khatiwada’s statement at the SEBON event is timely and appropriate. We applaud his vision and  farsightedness.