The future of cryptocurrenciesInstead of banning bitcoins, Nepal could study its underlying technology and could create a blockchain to form a regulated digital currency of its own.
Bitcoins have taken the financial world by storm, and Nepal is no exception. But what is it? And why has it been a hot topic for the past few years?
The selling of goods and services in exchange for cashable objects has been a trend for millennia. In recent years, ‘cryptocurrency’ has come to be a part of this trend.
But what are these cryptocurrencies?
‘Bitcoin’ is the term that has been most famous among interested investors in recent times. Bitcoins, Litecoins, Altcoins, Ethereum or whatever these are called, are all distributions that are based upon a computing platform widely known as
"blockchain" where 'cryptography' as a method is used to safeguard the transactions between two people from being public or detectable. However, this cryptographic transaction remains as a record in the ‘chain’. To be precise, cryptocurrencies are digital assets which are designed to work as mediums for exchange.
One for the future
Digital currencies are the future of transactions. Humankind cannot remain reliant upon paper money and metal coins. In an era of science where there are possibilities of colonising and terraforming distant planets, paper money and metal coins could be huge hurdles for humans if they are to be used as modes of transaction for any exchanges. The digital world is in need of digital money.
So far, cryptocurrencies are illegal in a few countries, whereas the rest of the world either sees it as fitting to utilise these ‘monies’, or keeps them in a grey area of financial law. Similarly, though most countries in the world do not criminalise cryptocurrencies, they have yet to define their usage as monies or commodities, thus making varied classifications all over the world.
Nepal Rastra Bank has already made it clear in its notice dated August 13, 2017 that all transactions related to or regarding Bitcoins are illegal. But it allied Bitcoins to “Foreign Exchanges”, though cryptocurrencies have no foreign central authority to regulate them. This is where the confusion is. Bitcoin is a decentralised digital currency that is traded from one individual to the other, 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.
Barred without understanding
Though digital currencies and commodities are the future of the financial world, they are still in an experimental phase. And a volatile economy such as Nepal’s might not be able to handle the flow of cryptocurrencies just yet. Uncontrolled flow of unregulated money could crash the economy of a country like Nepal. But then, why not try and regulate it?
Nepal’s financial regulators could have rather suspended the use of cryptocurrencies for a time being, and could have started research on how the nation could benefit from the utilisation of digital currencies. India has put these currencies in a grey area and has started to study them. Similarly, Nepal too could look into the possibilities of ‘regulated’ digital currencies that could become an alternative to paper money.
Where the People’s Bank of China, Bank of Japan and the European Central Bank have already started studies on the use of blockchain, Nepal could present itself as a part of the study. Digital currencies could surely make exchanges and transactions easier.
This, however, is currently very difficult to realise in Nepal, since existing money related laws constrict the outward flow of money from the country. Very minor possibilities are accepted which has always made outward direct investment impossible. This will surely halt the flow of digital currencies.
Nepali financial laws have to change and be on par with the changing global financial environment. This is related to the need for a regulatory mechanism for digital currencies and for its mining. Mining could be a governmental project, where only the government can mine and the citizens create a “recorded and registered” wallet for buying digital currencies from the government and pay certain fees for using them, like paying tax for income.
Bitcoin is not the only cryptocurrency and there are huge possibilities in the world of digital currencies. Nepal could very well invent one of its own.
But this requires a lot of study, a lot of research and alot of patience and effort.
Will the financial environment of Nepal dedicate itself to see the plethora of options to be a part of the digital world?
Rijal is a licensed corporate lawyer and partner of the law firm Associates Hub