Much-hyped term ‘cryptocurrency’ remains foreign to a lot of Nepalis. It is also because there is no law in Nepal yet that directly addresses such a thing. In addition, the transaction of cryptocurrency is still legally disputable in Nepal.
So, here we will explain what cryptocurrency means as far as the Nepali law is concerned.
What is cryptocurrency?
Simply put, a cryptocurrency is a digital or virtual currency secured by cryptography, based on blockchain, which makes it nearly impossible to counterfeit. Blockchain is a distributed database shared with the node of computer networks. But, some philosophers also say there is no such thing as a cryptocurrency or a wallet, and it is just an agreement among the networks about ownership of currencies.
What is Bitcoin?
Bitcoin is one of such cryptocurrencies, which is highly regarded and considered one of the most valued currencies in existence. Bitcoin can be received through mining or can be purchased from cryptocurrency exchanges. Mining is the process by which new Bitcoins enter circulation.
In this process, one needs to solve a computational puzzle by downloading software that contains a partial or complete history of transactions that have occurred in its networks. The number of Bitcoins is limited to up to 21 million coins.
Why are its benefits?
The fast-growing acceptance of cryptocurrencies has created reluctance among humankind for the use of paper money as the latter forces them to pay extra service chargers to intermediator for its services. Unlike paper currency, cryptocurrencies include cheaper and faster money transfers and decentralised systems that do not collapse at a single point of failure. Further, crypto activists believe that by replacing centralised paper money with all cryptocurrencies, it will be easier for a country to get rid of corruption. They regard it as a form of political and social activism.
Why is cryptocurrency controversial then?
But, again, the use of cryptocurrencies is blamed for a rise in criminal activities in society. A report published by a crypto asset firm estimates that nearly 80 per cent of all initial coin offerings (ICOs) launched in 2017 such as the issuance of new cryptocurrencies were fraudulent. Moreover, the price of Bitcoin fluctuates wildly and many people have lost money due to this. Crypto wallets are difficult to understand and use, and fraudulent transactions are difficult to reverse.
What does the Nepali law say about this?
Issues about cryptocurrency came to light in Nepal after Nepal Rastra Bank issued a notice on August 13, 2017, restricting any Bitcoin transaction in Nepal. However, the notice was issued without proper research, legal acceptance and assessment of its implication.
Firstly, the notice only made the transaction of Bitcoin illegal, leaving all other cryptocurrency transactions unpunishable. This evidence lacks the seriousness of the central bank in regard to cryptocurrencies.
Secondly, the notice was published being allied on “foreign exchange”. This is where the confusion regarding Bitcoin lies.
Bitcoin has no central authority to regulate it and rather is a decentralised digital currency traded from one individual to the other 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. The supporters of cryptocurrencies advocate that due to decentralisation created by Bitcoin, a paradigm shift of centralised money occurs, which bypasses an intermediator for the exchange of centralised money, also a primary reason for the innovation of cryptocurrencies. Therefore, Nepal Rastra Bank’s ascertaining transaction of Bitcoins under Foreign Exchange Regulation, 1962 is faulty.
In addition, the NRB’s claim that its legislation in 1962 had already incorporated the concept of Bitcoin, which actually was introduced in 2009, provides ample ground to suspect the intention and seriousness of the central bank.
Lastly, whenever the Nepal government prosecutes crimes related to Bitcoin, it has been found using various legislations. For instance, in certain cases, the prosecutors refer to Nepal Rastra Bank Act in their charge sheets while others refer to Bank and Financial Institution Act. Such inconsistency and unpredictability depict a scanty understanding of cryptocurrencies among government attorneys.