Nepal's Push for Digital Financial Infrastructure
Nepal's government and central bank have actively promoted the development of a financial infrastructure system centered on mobile electronic payments since 2019. This initiative aims to enhance financial inclusion and modernize the nation's economic framework.
With a per capita GDP of only $1,034 (as of 2018), a significant portion of Nepal's population remains unbanked. Approximately 40% of citizens lack access to traditional banking services. The high costs and security challenges associated with deploying and maintaining ATM networks have historically hindered financial accessibility.
In contrast, mobile phone penetration in Nepal has exceeded 100%, indicating that many citizens own more than one device. This widespread mobile adoption provides a solid foundation for implementing a mobile-based electronic payment system, offering a viable alternative to conventional banking.
GVE's Role and Technological Expertise
A Japanese digital finance startup, GVE, is providing the core technological components for this project. The company brings specialized expertise in advanced electronic payment solutions.
GVE's experience includes prior involvement in a digital currency project in Myanmar. The company was initially engaged to apply its "EXC" technology following a request from the country's leadership. However, that particular project was ultimately discontinued due to external geopolitical circumstances.
Following the Myanmar project, Nepal expressed strong interest in GVE's EXC-based electronic payment system. With financial backing from the Japan International Cooperation Agency (JICA), the Nepalese government selected GVE to develop and deploy its national electronic payment infrastructure, which was slated to become operational in 2022. Upon successful implementation of the electronic payment network, the two parties planned to further explore the potential introduction of a central bank digital currency (CBDC).
The EXC Technology Explained
GVE's EXC system is built upon a foundation of Sony's FeliCa near-field communication (NFC) technology and complies with relevant international standards. The company has further integrated and developed this technology to create a comprehensive hardware and software solution for mobile electronic payments.
A key innovation of the EXC system is its approach to security. It is designed to be controlled by a central bank and purportedly offers security advantages over blockchain technology. The system achieves this by simultaneously updating three encrypted databases for:
- Currency issuance information
- Account information
- Transaction information
This proprietary technology received a Japanese patent in 2018, with international patent applications pending at the time of reporting.
Security Advantages and Claims
GVE representatives emphasize that a digital currency issued by a national central bank requires absolute security. The primary concerns are protecting users' personal information and ensuring the digital currency itself is immune to cyber-attacks and theft.
The company asserts that its EXC system's security technology is superior to traditional blockchain encryption methods. They claim the system's architecture, with its three synchronously updated encrypted databases, is so robust that even a quantum computer could not simultaneously decipher and replace the passwords securing all three datasets. This high level of security is presented as a critical requirement for a national digital currency initiative.
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Frequently Asked Questions
What is the main goal of Nepal's financial infrastructure project?
The primary goal is to increase financial inclusion by leveraging mobile technology. With high mobile penetration but low access to traditional banking, an electronic payment system allows a broader population to participate in the formal economy.
How does GVE's EXC technology differ from blockchain?
While blockchain is a decentralized ledger technology, EXC is a centralized system controlled by a central bank. GVE claims its method of synchronously updating three encrypted databases offers enhanced security over standard blockchain encryption, making it suitable for national digital currencies.
Why was Nepal a suitable country for this project?
Nepal's very high mobile phone penetration rate, contrasted with its low banking access, created a perfect scenario for a mobile-first financial solution. This bypasses the need for expensive physical banking infrastructure.
What is the role of the Japan International Cooperation Agency (JICA)?
JICA provided the necessary funding for the project. This financial support was crucial for the Nepalese government to partner with GVE and implement the advanced technological system.
What are the future plans after implementing electronic payments?
The successful rollout of the electronic payment network was intended to be a first step. The long-term plan involved further discussions and exploration into launching a full central bank digital currency (CBDC) for Nepal.
What makes EXC potentially resistant to quantum computing attacks?
GVE claims that the necessity to break three simultaneously updated and encrypted databases creates a computational hurdle too great, even for quantum computers. However, this remains a claim by the company and is a subject of technical evaluation.