Nepal Moves Toward Digital Rupee, Legal Reforms and Pilot Testing Underway

Nepal will need significant reforms to its existing legal framework to formally introduce the digital rupee as a Central Bank Digital Currency (CBDC). In particular, targeted amendments to the Nepal Rastra Bank Act, 2002 have been identified as necessary to establish the legal status, regulatory framework and jurisdiction of the digital currency. Alongside legal reforms, preparations are also underway for pilot projects and simulation exercises to test the technical and practical aspects of the digital rupee in a controlled and secure environment. Such testing is expected to help identify potential technical failures, operational challenges and systemic risks before the currency is introduced for real-world transactions. The concept framework has also highlighted data security and user privacy as major concerns associated with the introduction of digital currency. A strong and integrated legal framework, or potentially a separate dedicated law, has been recommended to safeguard citizens’ personal information and financial transaction data. Following the completion of necessary legal and regulatory reforms, as well as successful pilot testing and simulations, the digital rupee is expected to be introduced to the general public in phases, subject to the readiness of the system and the effectiveness of its safeguards.