The Nepal Rastra Bank (NRB) has ramped up its efforts to launch a pilot program for its Central Bank Digital Currency (CBDC), aiming to begin testing within the next fiscal year, 2025/26. A basic prototype has already been developed, and preparations are now accelerating as the central bank positions itself alongside other nations exploring digital currency solutions.

A CBDC is a government-issued digital currency intended to offer the convenience of digital transactions while maintaining the trust and stability of traditional fiat money. Countries such as the Bahamas, Jamaica, and Nigeria have already introduced retail CBDCs, while major economies including China, India, and Russia are currently in the pilot phase. Conversely, nations like Denmark and Kenya have opted against retail CBDCs after conducting in-depth evaluations, according to an NRB study published last year titled “Exploring the Global CBDC Landscape: Comparative Study of Selected National Initiatives.”

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The global push toward CBDCs began in response to the rise of private-sector stablecoins and the increasing involvement of big tech companies in financial systems, especially after some countries imposed bans on volatile cryptocurrencies.

NRB began revising its governing Act nearly three years ago to pave the way for a digital version of the Nepali currency. At the time, experts advised the bank to proceed cautiously and monitor global developments before moving forward. This led NRB to commission a concept study titled “Central Bank Digital Currency (CBDC): Identifying Appropriate Policy Goals and Design for Nepal,” which was submitted in August 2022.

The central bank’s initial roadmap included piloting a wholesale CBDC in August 2026, followed by a retail CBDC in June 2027. A decision on a cross-border CBDC is expected by December 2026. The wholesale CBDC will be designed for interbank transactions and large-scale settlements, while the retail version will cater to everyday public use.

According to Kiran Pandit, Executive Director of NRB’s Payment Systems Department, stakeholder consultations are ongoing, and their feedback will be incorporated into the testing phase scheduled for the upcoming fiscal year. “Efforts are underway to test it ahead of schedule,” Pandit said. “Initially, it is planned to be used as a pilot for interbank transactions between banks and financial institutions (BFIs).”

NRB had reiterated its commitment to developing a wholesale CBDC model in its monetary policy for the current fiscal year. To move forward this initiative, a high-level steering committee was formed under the leadership of Deputy Governor Bam Bahadur Mishra. A separate CBDC unit has also been established within the Payment Systems Department to manage the initiative.

The feasibility study conducted last year recommended that the CBDC project move forward only with a dedicated structure and the active participation of key stakeholders. It also emphasized the need for robust technological infrastructure, enhanced data security, legal frameworks, capacity development, clear objectives, and broad public awareness.

The study further noted that while the shift toward digital currency is necessary due to the declining use of cash, the success of any CBDC will depend heavily on political support and public acceptance.

NRB hopes that the digital currency will boost the adoption of digital payments in Nepal and reduce the significant costs associated with printing and distributing physical banknotes.