New Era of Digital Finance in Nepal

The global financial system is on the verge of significant transformations, largely driven by the rapid development of digital technologies. One of the most discussed innovations in recent years has been the concept of central bank digital currencies (CBDC). As of March 2024, more than 130 countries, representing over 95% of global GDP, are actively researching, developing, or already piloting CBDCs.¹By the end of 2022, 93% of central banks were involved in CBDC work, and it is projected that there could be 15 retail and nine wholesale CBDCs in circulation by 2030.³This global momentum underscores the recognition of the importance and potential transformative power of CBDCs, driven by factors such as the rise of private digital currencies and the need to modernize payment systems. Nepal, like many other developing countries, is also exploring the prospects of introducing its own national digital currency, the digital rupee.

CBDCs are of particular interest to developing economies. The motivations for their implementation often include expanding financial inclusion, reducing reliance on cash, and stimulating digital innovation.¹CBDCs can serve as a digital gateway for the unbanked population, offering services such as payments and savings.⁴Research from the Bank for International Settlements (BIS) shows that developing and emerging market economies (EMDEs) are more likely to focus on retail CBDCs.³For countries like Nepal, with their specific challenges in financial inclusion and high cash balances, CBDCs can offer tailored solutions that differ from the motivations of developed economies, which often focus on modernizing payment systems and maintaining monetary sovereignty.¹

The objective of this study is to provide a balanced and in-depth analysis of the specific opportunities and challenges that the potential introduction of a digital rupee poses for Nepal’s unique financial ecosystem. The analysis will take into account the country’s socio-economic context, current level of digital maturity, and regulatory environment. The report will examine Nepal Rastra Bank’s (NRB) motivations, potential benefits, critical risks, and lessons learned from international experiences in CBDC implementation to offer a forward-looking perspective for all stakeholders.

Global CBDC research is uneven; motivations and design choices vary significantly between developed and emerging economies. Nepal’s approach is likely to prioritize financial inclusion and efficiency gains, consistent with the overall goals of EMDEs. Accelerated global interest in CBDCs, driven in part by private digital currency initiatives such as Libra¹, demonstrates the defensive and proactive stance of central banks to maintain monetary sovereignty in an increasingly digital world. This deeper global context is an important backdrop to understanding the NRB’s considerations. The very fact that the NRB is exploring the possibility of issuing a CBDC⁵signals recognition of the limitations of existing payment systems and the potential of new technologies to overcome them, even if the path is fraught with difficulties. It is a proactive step towards modernizing the financial infrastructure.

Current Financial and Digital Landscape of Nepal

Nepal’s financial system is characterized by the dominance of the banking sector, high reliance on remittances, and a developing capital market. Banks and financial institutions (BFIs) are facing rising non-performing loans (NPLs), which increased from 1.3% in June 2022 to 3.9% by the end of FY2024.⁸Commercial banks are required to allocate certain shares of their loan portfolio to priority sectors, including agriculture, energy and micro, small and medium enterprises (MSMEs).⁹Remittances play a significant role in Nepal’s economy, increasing by 25.3% in Nepali rupee terms in the fiscal year 2023/24.¹¹The cost of sending remittances remains a hot topic: the average global cost to send US$200 in Q4 2023 was 6.4%; for the US-Nepal corridor, costs varied (for example, the total cost via WorldRemit was 2.46% for US$200).¹²Nepal Stock Exchange (NEPSE) sees growth in investor participation as DEMAT accounts approach 6.3 million by June 2024¹⁴and reached 6.8 million by the beginning of 2025.¹⁵The market is characterized by the predominance of retail investors (99% in the secondary market as of February 2021¹⁶), but faces problems such as market manipulation and low liquidity.¹⁷Trading volumes vary; for example, on March 27, 2025, the volume was Rs 522.3 million.²¹, June 9, 2025 – Rs 8.68 billion²², and on June 11, 2025 – 9.90 billion rupees.²³This context is important because the high reliance on remittances and their associated costs point to a potential use case for CBDC. An emerging capital market with growing participation of retail investors requires robust systems where CBDC could play a role in settlements or as an investment vehicle, but also carries risks if not properly managed. The health of the banking sector (NPL) is a critical factor in assessing the impact of CBDC on financial stability.

Financial inclusion in Nepal is improving, but significant gaps remain. As of mid-January 2024, BFI deposits had grown by 6.6% and private sector lending by 4%.¹¹Despite Nepal’s high total credit to GDP ratio (over 90%), MSMEs face a significant financing gap of US$3.6 billion.⁸Only 16% of startups have access to BFI capital.⁸According to the 2022 NRB baseline study, the population’s financial literacy is 57.9% (11.59 out of 20 points). Financial knowledge is estimated at 47.3%, financial behavior at 63.5%, and financial attitudes at 64.1%.²⁴Only 27.5% of the adult population achieved the minimum targets for all components of financial literacy. There are disparities by gender (men are 7.5 percentage points higher), age (the younger generation demonstrates better knowledge), level of education, place of residence (urban/rural) and economic sector.²⁴Low levels of financial literacy, especially financial knowledge, pose a major obstacle to the adoption and safe use of CBDC. A digital rupee will require targeted education campaigns to prevent abuse and ensure that users understand its features and risks. The existing gaps in financial inclusion, especially for MSMEs and the rural population, are a strong argument in favour of a CBDC, provided it is properly designed.

Nepal has seen significant growth in digital payments and the development of its fintech ecosystem, fueled by the COVID-19 pandemic, government initiatives, and rising mobile and internet penetration.²⁸The number of mobile banking users has exceeded 23 million, and digital wallets – 21 million.²⁸QR payment volumes have grown by nearly 200% from 2022 to mid-March 2023.²⁸The leading platforms are eSewa and Fonepay.³⁰Digital lending product Foneloan has disbursed over 85,000 loans worth Rs 1.6 billion as of January 2023.³²The NRB actively supports these processes, having launched the Digital Finance Innovation Hub in March 2025 to support fintech innovators and exploring the possibility of creating a regulatory sandbox.⁵The NRB is also working on a CBDC prototype with the support of the BIS.¹The existing and growing digital payments ecosystem provides the foundation for a CBDC. However, a digital rupee will need to offer clear advantages over existing private solutions or integrate seamlessly with them to gain traction. The NRB’s initiatives to create an innovation hub and sandbox are critical to creating a collaborative environment in which CBDC and private fintech can coexist and thrive.

Despite progress, Nepal faces a number of challenges. A significant portion of the economy (51% of GDP) is in the shadows³⁴, which is higher than the world average; 85% of Nepal’s workforce is employed in the informal sector.³⁵Although direct data on the cost of cash management in Nepal is not available in the presented materials, the general advantages of CBDC include reduction in these costs (printing, storage, transportation).⁷Current tariffs for various banking operations³⁷indirectly indicate the operational costs associated with traditional banking. The digital divide remains a major issue: internet penetration was 55.8% at the beginning of 2025.³⁹There are significant differences between the city and the village: 59% of city residents and 34% of rural residents have access to the Internet at home; 20% of city residents and 5% of rural residents own computers.⁴⁰Digital literacy is also a problem, especially in rural areas and among women.⁴²The vast informal economy represents both an opportunity (potential for formalization through digital, traceable payments) and a challenge (resistance to implementation if it means increased controls) for CBDC. High levels of cash usage suggest potential savings from CBDC implementation. Digital divide is a major obstacle; CBDC offline payment solution⁴⁵will be critical to ensuring inclusivity.

The combination of a large informal economy, high reliance on cash, and significant gaps in financial inclusion (especially for MSMEs) creates a compelling, multifaceted “problem area” that a well-designed retail CBDC could address. However, low levels of financial and digital literacy could seriously undermine its effectiveness. Thus, a CBDC can only be a powerful tool if it simultaneously addresses both the literacy and digital divide, otherwise it risks exacerbating exclusion. The rapid growth of private digital payment solutions (eSewa, Khalti²⁸) is indicative of the public’s appetite for digital finance. A digital rupee must offer unique value propositions (e.g., greater security as a central bank liability, offline functionality, lower transaction costs for certain use cases) to compete with or complement these existing popular services rather than simply duplicating them. For example, government-backed CBDC¹and the possibility of offline work³⁰could be key differentiators. Rise in non-performing loans in the banking sector⁸ and the vulnerability of the capital market to manipulation¹⁷point to underlying systemic risks. While CBDC is not a straightforward solution, its implementation could have ripple effects (positive or negative) on financial stability that the NRB should carefully consider in its design and implementation. For example, a poorly designed CBDC could exacerbate bank disintermediation.⁴⁷Government support for digital transformation (e.g. Digital Nepal Framework⁴⁸) and the proactive position of the NRB in relation to fintech innovations (Innovative hub of digital finance³³) create a favourable policy environment for exploring CBDCs. However, success will depend on inter-agency coordination and sustained political will.

Table 1: Key indicators of Nepal’s financial and digital ecosystem (as of early 2025)

Note: Data on the percentage of population with bank accounts and the number of Khalti users require updating from the latest reports.

This table provides a quick, data-driven overview of Nepal’s current state, immediately highlighting the key challenges (e.g. literacy gaps, digital divide, informal economy) and opportunities (e.g. growth of digital payments, high mobile penetration) that a CBDC would address. This provides an important starting point for the subsequent analysis of the potential and risks of a CBDC.

CBDC Concept: What is a Digital Rupee?

A central bank digital currency (CBDC) is a digital form of a country’s official currency, issued and regulated by its central bank. It is a government-backed digital fiat currency intended to be used as legal tender.¹Unlike decentralized cryptocurrencies like Bitcoin, CBDCs are centralized and owned by the government.⁵⁰Thus, the digital rupee will be a direct liability of Nepal Rastra Bank, distinct from commercial bank money or existing private digital money such as eSewa balances.

There are different types of CBDC, the choice of which depends on the objectives of the central bank and the characteristics of the financial system.

• Retail and Wholesale CBDC: Retail CBDCs are intended for use by the general public (individuals and companies) in everyday transactions, while wholesale CBDCs are focused on settlements between financial institutions, such as interbank transfers and financial market transactions.⁷Developing countries are increasingly focusing on retail CBDCs.³Nepal’s pilot project is expected to target both wholesale and retail transactions.¹
• Account-based and Token-based: Account-based CBDCs link ownership to the identity of the owner (“I am, therefore I own”), whereas token-based CBDCs link ownership to the possession of a private key or digital signature (“I know, therefore I own”).⁵³However, this distinction can be blurred as tokens are often stored in accounts or wallets.⁵³Cash is a physical token.⁵⁴The UTXO (Unspent Transaction Output) model is an example of a token-based approach.⁵⁵
• One-tier and Two-tier models:

• Single-level (straight) model:The central bank manages all aspects of the system, including retail accounts and transactions.⁵⁵
• Two-level (indirect/mediated/hybrid) model:The central bank issues CBDC to intermediaries (e.g. commercial banks), who then distribute it to end users and manage their accounts/wallets. This model is more common worldwide.⁵⁵The obligation may remain with the central bank (indirect model) or pass to an intermediary (indirect/synthetic model, similar to e-money).⁵⁵

Understanding these architectural decisions is critical as they have significant implications for privacy, financial stability, the role of commercial banks, and operational complexity. Nepal’s choice will depend on its specific goals. Given global trends and the NRB’s likely desire to leverage existing banking infrastructure, a two-tier retail CBDC seems most likely.

Nepal Rastra Bank is actively working on the implementation of CBDC, with a pilot launch scheduled for 2026.¹The motives of the NRB include increasing financial inclusion, reducing dependence on cash, and improving transparency and efficiency of payments.¹, modernization of the financial system⁵, stimulating innovation⁵and protection of monetary sovereignty.³⁰The fourth strategic plan of the NRB (2022-2026) mentions studying CBDC and creating a “sandbox”.⁶NRB’s motivations are consistent with typical developing country objectives. The focus on financial inclusion and reducing cash dependence is a strong driver given Nepal’s context. The pilot project planned for 2026 signals serious intent.

The choice of CBDC architecture (e.g., a two-tier indirect model versus a direct model) is not just a technical decision, but a profound political choice that will determine the future role of the central bank versus commercial banks and fintechs in the payments ecosystem. The direct model significantly expands the operational role of the central bank⁵⁴, potentially displacing banks. The two-tier model retains a role for private intermediaries. The NRB’s choice will reflect its strategic vision for the structure of the financial sector. Although “token-CBDC” is often compared to digital cash due to privacy, achieving true cash-like anonymity in a digital token is technically and regulatory challenging, especially given concerns over AML/CFT. Nepal will face a difficult trade-off here. Given that tokens are often held in accounts/wallets⁵³, as well as the need to comply with anti-money laundering and counter-terrorism financing requirements⁷, a fully anonymous token-based retail CBDC is unlikely; some level of traceability would likely be required. NRB exploring CBDC possibilities⁵ comes in parallel with its efforts to develop a digital finance innovation hub and regulatory sandbox.⁵This implies a holistic approach to digital transformation, where CBDC is one component of a broader strategy, ideally designed in synergy with private sector innovation.

Table 2: Comparison of CBDC architectural models and their implications for Nepal

Note: The table is synthesized from sources.¹

This table clarifies complex CBDC terminology and models for business audiences. More importantly, it links these abstract models to the specific context of Nepal, helping readers understand which architectures are more likely or appropriate for a digital rupee and why, based on the likely goals of the NRB.

Potential Benefits of Digital Rupee for Nepal

The introduction of the digital rupee by Nepal Rastra Bank holds significant potential to transform the country’s financial system, offering solutions to existing challenges and opening up new opportunities for economic development.

Improving financial inclusion and accessibility: One of the main arguments in favor of CBDCs for developing countries is their ability to expand access to financial services for the unbanked and other vulnerable groups.¹Given the large proportion of Nepal’s population without access to formal financial services and the pronounced digital divide, particularly in rural areas (as discussed in Section 2), a digital rupee, especially one with offline payment functionality,³⁰, could be an important tool. It would reduce reliance on informal financial mechanisms, potentially reducing costs and risks for vulnerable populations.

Reducing operating costs and increasing the efficiency of the payment system: CBDCs can significantly reduce transaction costs and improve the overall efficiency of the payment system.¹For Nepal, where existing payment systems, despite their development, still come with costs, a digital rupee could offer a more efficient public payment infrastructure. Reducing the costs of person-to-person (P2P), person-to-business (P2B), and government-to-public (G2P) payments would benefit individuals, businesses, and the government.

Reducing the risks and costs associated with cash handling: CBDCs help reduce dependence on physical cash¹, the circulation of which is associated with significant costs for printing, storage, transportation and security.⁷In Nepal, with its high level of cash usage,⁵⁷and the difficult mountainous terrain that makes their distribution difficult, the transition to a digital rupee could lead to significant savings for the NRB and commercial banks, as well as reduce the risks of theft or loss of cash.

Stimulating innovation in the financial sector and supporting the fintech ecosystem: CBDCs can serve as a platform for innovation, facilitating the emergence of new financial products and services such as programmable money and smart contracts.³⁰Nepal has seen a growing fintech sector (eSewa, Khalti, Fonepay) and support from the NRB through the Innovation Hub and sandbox plans.⁵A digital rupee designed with interoperability in mind could be a fundamental layer on which fintech companies can create new business models, increasing competition and improving the consumer proposition.

Strengthening monetary sovereignty and competition with private digital currencies: CBDCs help protect a country’s monetary sovereignty in the face of the rise of private digital currencies.¹In Nepal, private cryptocurrencies are currently banned³⁰, and the digital rupee would become the only legal form of digital currency. This would strengthen the NRB’s control over the monetary system and provide a regulated digital alternative, potentially preventing demand for unregulated private options.

Increasing the transparency of financial flows and combating the shadow economy: Digital transactions leave an audit trail, promoting transparency and potentially reducing corruption and the shadow economy.⁷Given the significant size of the informal sector in Nepal (51% of GDP³⁴), a digital rupee could help shift more economic activity into the formal sector. This, in turn, would improve tax collection and reduce illicit financial flows, although the extent of this impact would depend heavily on the privacy settings chosen.

Improving cross-border payments and reducing the cost of money transfers: CBDCs have the potential to make cross-border payments faster, cheaper and more transparent.¹For Nepal, with its high reliance on remittances and the associated costs¹², this direction is especially relevant. NRB is already an observer in the mBridge project³⁰, indicating interest in international cooperation in this area. Successful implementation of a digital rupee for cross-border remittances could significantly reduce costs for Nepalese migrant workers and their families, increasing disposable income and improving the efficiency of foreign exchange earnings.

The successful implementation of a digital rupee focused on financial inclusion could have a cascading positive effect on poverty reduction and equitable economic development, especially if it empowers women and rural populations who are currently underserved by financial services. Reduced cash management costs for banks7 could free up resources that could be redirected to more productive lending or improved other customer services, potentially benefiting the economy as a whole. If a digital rupee facilitates cheaper and faster money transfers¹, this could not only benefit individual recipients but also improve Nepal’s overall balance of payments and foreign exchange reserve management by channelling more funds through formal systems.

Table 3: Potential Benefits of Digital Rupee for Nepal’s Financial System

Note: The table is synthesized from various sources covering the benefits of CBDC and the specific needs of Nepal.

This table clearly articulates the “benefits” of a digital rupee, directly linking the general merits of a CBDC to Nepal’s specific economic and social conditions. This provides a compelling rationale for NRB’s exploration of the technology and helps readers understand the stakes.

Key risks and challenges of implementing the digital rupee

Despite the significant potential, the introduction of a digital rupee comes with a number of serious risks and challenges that Nepal Rastra Bank needs to carefully assess and address.

Threats to financial stability: 

Bank disintermediation, risk of digital “bank runs”. CBDCs could compete directly with bank deposits, potentially leading to an outflow of funds from commercial banks to CBDCs (disintermediation). This, in turn, could lead to a reduction in bank lending if banks raise lending rates to compensate for losses or reduce lending volumes.⁴⁷During periods of financial instability, CBDCs could facilitate a more rapid “digital run on banks” as depositors may seek to move their funds into the perceived safety of a central bank digital currency.⁴⁷Considering the current situation of non-performing loans in Nepal⁸, any additional pressure on banks’ balance sheets requires careful management. Design features of CBDCs such as storage limits and tiered or zero yields could be used to mitigate these risks.⁴⁷The NRB needs to carefully consider the design of the digital rupee to avoid destabilising the existing banking system, which is the main source of credit in Nepal.

Cybersecurity: 

Protection against hacking, fraud and system failures. CBDC ecosystems are an attractive target for cyber attacks, including DDoS attacks, malware, phishing, and others.⁵⁸A successful attack could undermine public trust and have systemic consequences.⁶⁷The human factor is the key vulnerability.⁶⁷In Nepal, despite the growth of digital payments, cybersecurity infrastructure and public awareness may still be in the development stage. The NRB Payment Systems Supervision Report 2022-23 identified data privacy and cybersecurity as key concerns.⁶⁸Robust cybersecurity measures, continuous monitoring and user education will be paramount to the safety and security of the digital rupee.

Data privacy: 

Balancing anonymity with the need for control. CBDCs can create a “digital trail” of transactions.⁵⁸While this may help combat illegal activity, it raises privacy concerns and fears of government surveillance.⁵⁸There is a trade-off between privacy and the usefulness of data for political purposes.⁶¹In the context of Nepal, with its large informal economy and potential user concerns about government control, the privacy features of the digital rupee will be critical to its adoption. Layered anonymity (higher privacy for small-value transactions), robust data governance frameworks, and clear communication of data use policies are needed to mitigate these concerns.⁵⁸The wrong privacy balance can seriously hinder adoption or lead to data abuse.

Anti-money laundering (AML) and countering the financing of terrorism (CFT): 

Compliance with FATF standards. CBDCs could be used for money laundering and terrorist financing if not designed with appropriate safeguards.⁷Nepal was placed on the FATF grey list in February 2025 due to deficiencies in its AML/CFT system.⁶⁹This greatly increases the importance of robust AML/CFT controls in any digital rupee design. The digital rupee design should clearly demonstrate a strengthening, not a weakening, of Nepal’s AML/CFT regime. This will likely require restrictions on anonymity and strict KYC/transaction monitoring, which could potentially conflict with some users’ privacy desires. Failure in this area could worsen Nepal’s standing with the FATF.

Problems of implementation and acceptance by the population: 

Digital literacy, trust, infrastructure. The implementation of CBDC faces obstacles such as the “chicken and egg” problem (consumers waiting for merchants, merchants waiting for consumers) and requires digital and financial literacy, trust and adequate infrastructure.⁵⁷Nepal faces low levels of financial and digital literacy (Section 2), a significant digital divide (Section 2), and potential trust issues in new government digital initiatives. Existing popular digital wallets (eSewa, Khalti) set a high bar for user experience. Large-scale awareness campaigns, user-friendly design, and providing tangible benefits over existing options will be critical to widespread adoption of the digital rupee.

The need to create an appropriate legal and regulatory framework. 

A sound legal framework and a solid regulatory foundation are prerequisites for the issuance of CBDC.⁷This includes empowering the central bank to issue a digital currency. Nepal’s existing legal framework may require significant updates to accommodate a CBDC. Legal reforms should go hand in hand with technical development to avoid delays and provide clarity on the status of the digital rupee and the rules for its operation.

Nepal’s inclusion in FATF’s grey list⁷⁰creates a uniquely challenging environment for CBDC implementation. The design of the digital rupee will be closely scrutinized for its AML/CFT robustness, potentially forcing a design that prioritizes traceability over anonymity. This, in turn, could impact user adoption, especially within the large informal economy. Nepal’s Existing Digital Divide⁴⁰, if not addressed in tandem with the rollout of CBDC, could result in a “two-tier” digital financial system, where urban, more literate populations benefit from CBDC, while rural, less literate populations are further marginalized or forced to rely on potentially more expensive/less secure intermediaries for access. The operational burden on the NRB to manage a CBDC, especially if it involves direct interaction with retail users or a highly centralized model, could strain its existing resources and capabilities, potentially diverting attention from other critical central banking functions.⁵⁵Competition with established private digital payment providers (eSewa, Khalti²⁸) is a significant barrier to adoption. Unless the digital rupee offers compelling unique benefits (such as superior security as legal tender, significantly lower costs for specific transactions, or unique features such as programmability not offered by private players), users and merchants may not have an incentive to switch or add another payment option.

Table 4: Key risks and mitigation strategies for digital rupee in Nepal

Note: The table is synthesized from sources⁷ and Nepalese context from other fragments.

This table provides a structured overview of the multifaceted risks. By linking the overall risks of CBDC to Nepal’s specific vulnerabilities (such as FATF status or digital literacy levels) and suggesting specific mitigation strategies, it provides actionable insights for policymakers and helps them understand the complexity of the CBDC decision.

International Experience and Lessons for Nepal

Learning from international experiences in CBDC implementation is critical for Nepal to learn valuable lessons from the successes and failures of other countries and adapt them to its own unique circumstances.

CBDC pilot projects in India (e-Rupee), China (e-CNY), Bhutan.

• India (e-Rupee): By March 2025, the e-rupee circulating supply is expected to reach Rs 1,016 crore (Rs 10.16 billion). The retail pilot involves 17 banks and 60 lakh (6 million) users. The wholesale pilot is also being expanded. The focus is on offline payments and programmability (e.g. for direct government payments, employee benefits). Cross-border pilots are being explored.⁷²Lessons and challenges include that initial adoption may be driven by specific use cases and government support. Scaling retail use and ensuring interoperability are ongoing challenges. The focus is on reducing cash management costs and improving digital payment penetration.³⁶
• China (e-CNY): By early 2022, there were 261 million wallets registered, but there are questions about active usage and average account balances (3 RMB for individual wallets as of October 2021).⁷³The e-yuan was tested during the Olympic Games. The transaction speed is 10,000 per second, with the goal of reaching 300,000 TPS.⁷⁴Lessons and challenges include the possibility of large-scale piloting with government support. Driving organic, broad adoption beyond controlled tests and across a variety of use cases is challenging. Privacy concerns and KYC/AML trade-offs are obvious.⁷⁴Internationalization is a long-term goal, but faces obstacles.⁷³
• Bhutan (Digital Ngultrum): Partnership with Ripple Labs, using XRP Ledger (carbon neutral). Focus on financial inclusion (target 85% by 2023), efficiency of cross-border remittances and sustainability. A phased pilot project is planned for 2024-2026.⁷⁵Lessons and challenges demonstrate the potential of CBDC for small, environmentally conscious economies with specific needs such as remittances. Partnerships with private technology providers are a key strategy. Challenges include potential disruption to the banking sector and adjustments to monetary policy.⁷⁶

These examples demonstrate the diversity of models and outcomes. India’s focus on specific use cases and phased implementation, China’s large-scale experiments, and Bhutan’s partnership approach provide valuable insights for Nepal.

Other developing countries’ approaches to CBDC. Many developing and emerging market economies (EMDEs) are exploring CBDCs, often prioritizing financial inclusion and payment system efficiency.¹Examples include the Bahamas, Eastern Caribbean countries, Jamaica and Nigeria, which have launched retail CBDCs into circulation.³Studying the motivations, design choices, and implementation experiences of other EMDEs with similar economic structures or challenges to those faced by Nepal may provide more directly applicable lessons than looking only at large economies.

Recommendations of international organizations (BIS, IMF).

• IMF: The exploration of CBDCs should be iterative and flexible, with clear policy objectives, identification and mitigation of risks, assessment of potential, and provision of a robust legal/regulatory framework.⁶¹The IMF provides capacity development assistance to more than 50 countries.⁷⁷IMF stresses need to balance CBDC data use with privacy protection.⁵⁸
• UNTIL: Advocates a two-tier system to leverage private sector expertise in the retail interface while maintaining central bank control over the underlying register.⁵⁵Highlights the potential of CBDC as a platform for innovation.⁶²Offline payments research shows technical feasibility but comes with trade-offs.⁴⁶

These international organizations provide key framework documents, research and technical assistance. The interaction of the NRB with them (for example, BIS support in creating a prototype¹, capacity building with IMF assistance⁷⁷) is vital to comply with global best practices.

Mixed results from early CBDC pilots (e.g. low active adoption of e-CNY in China despite large number of wallets)⁷⁴) stress that technology deployment alone does not guarantee success. The user value proposition, convenience over existing alternatives, and trust are paramount. Nepal must learn from this and not rely on a “build it and they will come” approach. Bhutan’s CBDC project has a strong focus on cross-border remittances⁷⁵is highly relevant for Nepal given its dependence on remittances.¹¹A successful digital rupee for cross-border payments could be a “killer app” to drive adoption, but it requires complex international collaboration (e.g. mBridge project³⁰). The emphasis on public-private partnerships in many CBDC projects (e.g. BIS advocating for a two-tier model⁵⁵; IDEMIA partners with R3 for offline solutions⁴⁵) suggests that the NRB will not be able to develop and implement a digital rupee in isolation. Active engagement with local banks and fintech companies will be critical for adoption, innovation and delivery of user-centric services.

Table 5: Comparative Analysis of International CBDC Projects and Lessons for Nepal

Note: The table is synthesized from sources.³

This table provides a structured comparison of different international approaches, allowing readers to see the range of strategies and results. Highlighting specific “lessons for Nepal” makes international experience directly relevant and actionable to the focus of the report.

Roadmap for Digital Rupee: Recommendations and Prospects

The development and implementation of the digital rupee is a complex multi-stage process that requires careful planning and coordination. The success of this initiative will depend on a balanced approach to technological solutions, the creation of the necessary infrastructure, the involvement of all stakeholders, and the improvement of the financial and digital literacy of the population.

A phased approach to development and implementation. 

International experience shows the feasibility of a phased approach. IMF’s 5P methodology (Preparation, Proof of Concept, Prototype, Pilot, Production/Launch)⁶⁵or similar step-by-step strategies used in other countries, such as Bhutan⁷⁶, can serve as a guide for Nepal. It is recommended to start with a clear definition of policy objectives⁶¹, conducting comprehensive feasibility studies⁷, followed by limited pilots for specific use cases (e.g. government payments to the population, selected retail segments) before considering a broader rollout. The NRB’s current plans to launch a pilot project in 2026¹are consistent with this approach.

Necessary technological and infrastructure solutions (including offline payments). 

The choice of underlying registry technology (DLT or centralized database), CBDC model (token-based or account-based) and security protocols is fundamental.⁵³For Nepal, given the existing digital divide, offline payment capabilities are critical.³⁰Technologies for secure offline payments exist, but come with trade-offs in terms of security and preventing double-spending.⁴⁵It is necessary to ensure adequate digital infrastructure (communications, devices) and compatibility with existing payment systems.⁴⁴The recommendation for Nepal is to prioritize the development of robust and secure offline functionality. The existing high mobile penetration should be leveraged, but solutions should also be planned for areas with limited access to smartphones. It is important to ensure compatibility with eSewa, Fonepay, and other systems to avoid ecosystem fragmentation.

The importance of public-private partnerships and the involvement of the fintech sector.

The CBDC ecosystem includes central banks, commercial banks, payment service providers (PSPs), technology providers, merchants and users.⁶²Two-tier models rely on the private sector for dissemination and innovation.⁵⁵In Nepal, the NRB Innovation Hub³³and existing fintech players³²create a framework for collaboration. The NRB should actively engage banks and fintech companies in the development, piloting and implementation of the digital rupee, clearly defining roles and responsibilities to encourage innovation while maintaining regulatory oversight.

Measures to improve financial and digital literacy.

Financial and digital literacy are critical to the adoption and safe use of CBDC.⁴⁴Nepal has low levels of financial and digital literacy (see Section 2). The NRB and BFI already have mandates to conduct financial literacy programmes.²⁴It is recommended to integrate CBDC-specific modules into existing financial literacy campaigns, targeting vulnerable groups (women, rural population, elderly) and using multiple channels (TV, radio, public workshops, digital platforms).

Long-term outlook and impact on Nepal’s financial system.

The successful implementation of the digital rupee has the potential to significantly modernize Nepal’s payment system, improve financial inclusion, and support economic development. However, its impact will depend on design choices, public acceptance, and how well risks are managed. There is potential to change the role of cash, commercial banks, and fintech companies. The digital rupee could facilitate new economic activities and improve the efficiency of public services. Continued monitoring, adaptation, and international cooperation will be key to the long-term success and sustainability of the digital rupee.

A successful digital rupee in Nepal is not just a technology project, but an initiative for socio-economic transformation. Its roadmap must integrate technological development with equally robust plans for legal reform, public education, stakeholder collaboration, and strengthening of infrastructure, especially in underserved areas. The digital rupee can be a critical enabler for other initiatives under Digital Nepal. If designed with interoperability and programmability in mind, it can serve as the financial backbone for various e-government services, smart city applications, and private sector innovations, creating synergies. The long-term success of the digital rupee will depend largely on the NRB’s ability to navigate the complex political economy of its implementation—balancing the interests of commercial banks (worried about disintermediation), fintechs (seeking opportunity), the government (seeking efficiency and control), and the public (wanting convenience, security, and privacy).

Conclusion: Towards a Digital Future for Nepalese Financial System

The introduction of a national digital currency (CBDC) by Nepal Rastra Bank is an initiative with huge transformative potential for the country’s financial system. Analysis shows that a digital rupee could offer significant benefits, including increased financial inclusion, especially for the unbanked and rural population, reduced cash management costs, improved payment efficiency, and spurred innovation in the fintech sector. Moreover, a CBDC could strengthen monetary sovereignty, enhance transparency in financial flows, and improve cross-border remittances, which is particularly relevant for Nepal with its high remittance dependence.

However, there are significant risks and challenges to realising these benefits. Threats to financial stability related to potential bank disintermediation and the risk of digital ‘bank runs’ require careful consideration of CBDC design, including possible holding limits and the absence of interest. Cybersecurity is a top priority given the potential attractiveness of a CBDC system to attackers. Data privacy concerns also come to the fore, requiring a balance between the anonymity required to build user trust and the needs of anti-money laundering and counter-terrorism financing controls – a particularly pressing issue in light of Nepal’s recent inclusion on the FATF grey list. Low levels of financial and digital literacy among the population, as well as the existing digital divide, could pose serious obstacles to widespread adoption of the digital rupee unless major education and infrastructure initiatives, including the development of robust offline solutions, are undertaken.

The key success factors for the digital rupee in Nepal will be:

1. Clearly defined goals and a step-by-step approach: The NRB should clearly articulate what problems the digital rupee is intended to solve and move towards its implementation gradually, starting with pilot projects and careful analysis of the results.
2. User-centered design: Convenience, security, low transaction costs and clear advantages over existing payment methods (including cash and popular digital wallets) will be decisive for public adoption.
3. Ensuring financial and digital inclusion: Developing robust offline solutions and large-scale financial and digital literacy programs are essential for inclusive adoption.
4. Robust legal and regulatory framework: The timely creation of a legislative framework defining the status of the digital rupee and regulating its circulation will ensure legal certainty.
5. Effective risk management: Proactively identify and mitigate risks related to financial stability, cybersecurity, data privacy and AML/CFT.
6. Public-private partnership: Actively involve commercial banks, fintech companies and other stakeholders in the development, testing and distribution of the digital rupee.

Nepal Rastra Bank and other regulators are advised to continue to deeply study international experience, especially countries with similar economic conditions and challenges. Cooperation with international organizations such as the IMF and BIS will provide access to expertise and best practices. It is important to create a flexible monitoring and evaluation system at all stages of the project to promptly respond to emerging issues and adapt the strategy.

The introduction of a digital rupee is not just a technological upgrade, but a complex socio-economic reform. Its prospects for successful implementation depend on a comprehensive approach that takes into account both technological and humanitarian aspects. If Nepal manages to competently cope with the challenges and seize the emerging opportunities, the digital rupee can become a catalyst for building a more modern, efficient and inclusive financial system that contributes to the country’s sustainable economic growth. However, this path requires balanced decisions, significant investments in infrastructure and human capital, and a long-term commitment from all stakeholders.

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