The global conversation around Central Bank Digital Currencies, or CBDCs, is gaining momentum. In countries like the United States, there’s a growing debate not about whether such technology is possible but about how it should be regulated and used. Stablecoins backed by the US dollar have attained support for settling payments and sending money across borders. However, the future of a digital dollar issued by the US government remains uncertain.

Because of this uncertainty, some countries may pause or change their plans to develop a CBDC. But for Nepal, this moment offers a unique opportunity. Introducing a digital version of the Nepali rupee, which is programmable and issued by the central bank, can help us improve our financial system and prepare for the future in several ways.

Why it matters

First, a CBDC can play a major role in improving financial access. Everyone should be able to take part in a fair and inclusive financial system, but many people in Nepal still don’t have access to traditional banking. A well-designed CBDC could allow people to use digital money even if they don’t have a bank account. New technology has made it possible for CBDCs to work offline.

This is important in Nepal’s rural areas with limited or unreliable internet access. China, for example, has developed a digital currency that works without an internet connection, letting people make payments offline. When they go online again, the system automatically updates.

The Bahamas was one of the first countries to introduce a CBDC, largely because they needed a better way to connect remote islands with little or no banking access, especially during natural disasters like hurricanes. The digital currency helped ensure people could still receive and use money even in emergencies. With its complex geography and frequent natural challenges, Nepal could benefit similarly.

Another strong reason for creating a CBDC in Nepal is to protect our financial independence, or what experts call monetary sovereignty. Private digital currencies like Bitcoin and stablecoins are becoming more common and don’t need banks to operate. This can make it harder for governments and central banks to control their financial systems. When Meta, the company which owns Facebook, announced its digital currency called Libra, it signalled that private companies could create money that moves quickly across borders and doesn’t follow traditional rules.

In today’s internet-driven world, people find ways to use these currencies, even if they’re not officially allowed. If Nepal does not act soon, people here might turn to digital currencies from other countries or private companies. This could be similar to when the Indian rupee was used widely in Nepal before we had our currency. Not having a Nepali digital currency might lead to losing control over our financial system, especially with the rise of cross-border transactions that are hard to regulate.

What would CBDC solve?

By creating our own CBDC, we can ensure that we control our money and protect our economy from outside influence.

Nepal must also keep up with changes in the world’s financial systems. Traditional accounting and banking methods are being challenged by blockchain, a new technology that allows value to be exchanged directly and securely without a central authority. This has led to digital assets—new types of financial tools that work entirely online.

Although digital assets are restricted in Nepal, they are becoming more common worldwide. To stay connected to this fast-changing global economy, Nepal must start adapting. Other countries are already building the infrastructure for automated payments, smart contracts and tokenised assets. These technologies make money more efficient, programmable and secure. Since Nepal does not allow private digital currencies, a CBDC would be the only legal way to bring these features into our financial system. It would allow banks, businesses and the government to experiment with new ideas while staying within a safe and regulated system.

Introducing a CBDC would also help spark innovation within Nepal. This would be the first time a public institution in the country officially uses blockchain technology. Nepal Rastra Bank would be taking a bold step to modernise our currency and encourage innovation between the government and the private sector. While Nepal’s payment systems, such as those managed by NCHL and Fonepay, have improved in recent years, the pace of change globally is much faster.

We must create an environment where new ideas can grow to stay competitive. A programmable digital rupee could allow for advanced features like smart contracts that handle real estate transactions or automatically distribute social welfare payments. During emergencies like earthquakes or floods, digital currency could make it easier to send aid quickly and securely. Some organisations in Nepal are already using blockchain to track and manage help for disaster victims. Still, they can’t fully use this technology without a digital currency that fits into their systems.

Remittances—money sent home from Nepalis working abroad—are one of the most significant sources of income for our economy. The way money moves across borders is changing fast, with blockchain playing a more substantial role in making these payments faster, cheaper and more secure.

Nepal needs to join this trend to improve its remittance systems. Since cryptocurrency and stablecoins are illegal in Nepal, CBDC is the only option connecting us to these new payment systems. Nepal Rastra Bank has already taken a step in this direction by joining Project mBridge as an observer. This global effort involves several countries using digital central bank money for international transactions. It’s a sign that Nepal is paying attention and preparing for the future.

The world is going through a significant shift in how money works. Governments, companies and everyday users are starting to rethink the difference between public money, like those issued by central banks and private digital currencies. In this changing environment, Nepal cannot afford to stand still. Our currency is already non-convertible in global markets, making it harder for us to participate in international trade.

A CBDC could be a practical way to modernise our currency and make it more useful in the digital world. The plan is to start with a CBDC for large financial institutions—called a wholesale CBDC—and then expand to one that everyone can use for international payments.

Around the world, financial institutions are at different stages of preparing for a digital future. Many agree that blockchain and digital assets will majorly affect how money is used and moved. But in Nepal, the conversation is in a nascent stage. This gives us a chance to catch up. Some tech leaders and FinTech companies understand the shift but hesitate to act because of the costs and risks of being the first. Once a CBDC is in place, it will provide a clear framework and reduce those risks, helping businesses confidently explore new possibilities.

Nepal Rastra Bank has a key role to play in this transformation. Moving ahead with a digital currency can promote innovation, make financial services more accessible and protect our economy. The decision to explore and implement a CBDC is timely, necessary and forward-looking.