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Nepal

Retail_Trading_Status

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Analysis ID
#530
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Created
2025-06-26 13:24
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Executive Summary

Retail cryptocurrency trading is explicitly prohibited in Nepal by the Nepal Rastra Bank (NRB), the country's central bank. This prohibition is enforced under the Foreign Exchange (Regulation) Act, 2019 and the Nepal Rastra Bank Act, 2002. The NRB's stance is driven by concerns regarding financial stability, consumer protection, and potential for illicit activities. While banning decentralized cryptocurrencies, Nepal is exploring a Central Bank Digital Currency (CBDC) with pilot testing anticipated around 2026.

Key Pillars

The primary regulator is the Nepal Rastra Bank (NRB). As cryptocurrencies are banned, there are no specific regulations or licensing frameworks for cryptocurrency exchanges in Nepal. KYC/AML regulations are not applied to crypto platforms because the activity is illegal; instead, authorities focus on identifying and penalizing any engagement in crypto transactions.

Landmark Laws

The Foreign Exchange (Regulation) Act, 2019 (originally 1962): This act prohibits buying, selling, or possessing foreign exchange without the permission of the Nepal Rastra Bank.
Nepal Rastra Bank Act, 2002: Grants the Nepal Rastra Bank (NRB) the exclusive authority to issue currency and manage the monetary system in Nepal.
Notice dated August 13, 2017: NRB issued a notice banning Bitcoin, citing the Foreign Exchange (Regulation) Act.
Notice dated January 23, 2022: Reiterated that all activities including use, trade, investment, and mining of virtual currencies and cryptocurrencies are illegal in Nepal.
Notice dated August 15, 2022: Specifically prohibited trading through platforms like Hyper Fund, emphasizing the risks of money laundering, investment in terrorist activities, fraud, and tax evasion.
Electronic Transaction Act, 2063: Violators engaging in cryptocurrency transactions in Nepal may also face charges under cybercrime laws like the Electronic Transaction Act, 2063.

Considerations

Cryptocurrencies are not legally classified as assets or property in Nepal; their use is illegal. There is no tax treatment defined for cryptocurrencies, given their prohibited status. The NRB has raised concerns regarding financial stability, consumer protection, potential for illicit activities such as money laundering and terrorist financing, capital flight, and the unregulated nature of cryptocurrencies. Despite the ban, there are indications of some underground cryptocurrency trading and usage, particularly for remittances, though this carries significant legal risks.

Notes

The NRB first banned Bitcoin on August 13, 2017. Subsequent notices and circulars have reinforced the ban on all virtual currencies. Nepal is exploring the concept of a Central Bank Digital Currency (CBDC), with the NRB releasing a concept paper on CBDC in August 2022, and pilot testing for a digital rupee anticipated around 2026. Enforcement actions include arrests and blocking access to exchanges via VPNs. Banks are directed to monitor and freeze accounts suspected of being linked to cryptocurrency transactions. Engaging in cryptocurrency transactions can lead to severe penalties, including fines (up to three times the amount involved), imprisonment, and confiscation of assets. Some citizens continue to use crypto for remittances despite the prohibition.

Detailed Explanation

Retail cryptocurrency trading, including buying, selling, and holding, is explicitly prohibited in Nepal. The Nepal Rastra Bank (NRB), the country's central bank, has consistently maintained a strict stance against all forms of cryptocurrency activities. This prohibition is enforced under existing financial laws, primarily the Foreign Exchange (Regulation) Act, 2019 (originally 1962) and the Nepal Rastra Bank Act, 2002. The NRB's position is driven by concerns regarding financial stability, consumer protection, potential for illicit activities such as money laundering and terrorist financing, capital flight, and the unregulated nature of cryptocurrencies. The government of Nepal, including the Ministry of Finance, supports the NRB's prohibitive stance. The NRB first issued a notice banning Bitcoin on August 13, 2017, citing the Foreign Exchange (Regulation) Act. This was followed by subsequent notices and circulars reinforcing the ban on all virtual currencies and cryptocurrency-related activities. For instance, a notice dated January 23, 2022, reiterated that all activities including use, trade, investment, and mining of virtual currencies and cryptocurrencies are illegal in Nepal. Another notice on August 15, 2022, specifically prohibited trading through platforms like Hyper Fund, emphasizing the risks of money laundering, investment in terrorist activities, fraud, and tax evasion. The ban extends to all Nepali nationals, both at home and abroad, as well as foreigners living in Nepal. Authorities have taken enforcement actions, including arrests of individuals involved in cryptocurrency trading and the blocking of access to major international exchanges via VPNs by Internet Service Providers (ISPs). Banks are also directed to monitor and freeze accounts suspected of being linked to cryptocurrency transactions. Engaging in cryptocurrency transactions in Nepal can lead to severe penalties, including fines (up to three times the amount involved), imprisonment, and confiscation of assets. Violators may also face charges under cybercrime laws like the Electronic Transaction Act, 2063. Despite the ban, there are indications of some underground cryptocurrency trading and usage, particularly for remittances, though this carries significant legal risks. While banning decentralized cryptocurrencies, Nepal is exploring the concept of a Central Bank Digital Currency (CBDC). The NRB released a concept paper on CBDC in August 2022, indicating an interest in leveraging blockchain technology in a controlled, centralized manner. Pilot testing for a digital rupee is anticipated around 2026.

Summary Points

Retail Cryptocurrency Trading Status in Nepal: Regulatory Analysis (2025-06-26)

1. Regulatory Status:

  • Banned: Retail cryptocurrency trading (buying, selling, holding) is explicitly prohibited in Nepal.

2. Key Regulatory Bodies and Roles:

  • Nepal Rastra Bank (NRB):
    • Central bank of Nepal.
    • Enforces the ban on cryptocurrency activities.
    • Issues notices and circulars prohibiting cryptocurrency-related activities.
    • Monitors and directs banks to freeze accounts suspected of cryptocurrency transactions.
    • Exploring the concept of a Central Bank Digital Currency (CBDC).
  • Government of Nepal (including Ministry of Finance):
    • Supports the NRB's prohibitive stance on cryptocurrencies.

3. Important Legislation and Regulations:

  • Foreign Exchange (Regulation) Act, 2019 (originally 1962):
    • Primary legal basis for the cryptocurrency ban.
    • Prohibits buying, selling, or possessing foreign exchange without NRB permission.
  • Nepal Rastra Bank Act, 2002:
    • Grants the NRB exclusive authority to issue currency and manage the monetary system.
  • Electronic Transaction Act, 2063:
    • May be used to prosecute individuals involved in cryptocurrency transactions under cybercrime laws.

4. Requirements for Compliance:

  • No Compliance Framework: Due to the ban, there is no legal compliance framework for cryptocurrency exchanges or related activities in Nepal.
  • Banks' Role: Banks are mandated to report suspicious activities that might indicate crypto dealings.

5. Notable Restrictions and Limitations:

  • Complete Ban: The ban extends to all Nepali nationals (at home and abroad) and foreigners living in Nepal.
  • Prohibited Activities: All activities related to virtual currencies and cryptocurrencies are illegal, including:
    • Use
    • Trade
    • Investment
    • Transactions
    • Mining
    • Payments
  • Enforcement Actions:
    • Arrests of individuals involved in cryptocurrency trading.
    • Blocking access to major international exchanges via VPNs by Internet Service Providers (ISPs).
    • Freezing of accounts suspected of being linked to cryptocurrency transactions.

6. Penalties for Non-Compliance:

  • Severe Penalties: Engaging in cryptocurrency transactions can lead to:
    • Fines (up to three times the amount involved).
    • Imprisonment.
    • Confiscation of assets.
    • Charges under cybercrime laws (Electronic Transaction Act, 2063).

7. Recent Developments and Changes:

  • Consistent Enforcement: The NRB has consistently reiterated the ban through notices and circulars.
  • CBDC Exploration: Nepal is exploring the concept of a Central Bank Digital Currency (CBDC).
    • NRB released a concept paper on CBDC in August 2022.
    • Pilot testing for a digital rupee is anticipated around 2026.
  • Underground Activity: Despite the ban, some underground cryptocurrency trading and usage persists, particularly for remittances, carrying significant legal risks.

Full Analysis Report

Report on the Current Status of Retail Cryptocurrency Trading in Nepal

Date: 2025-06-26

Topic: Retail_Trading_Status

Description: Assess whether individual citizens and residents in the country are legally permitted to buy, sell, and hold cryptocurrencies. Detail the regulatory environment surrounding this activity (e.g., KYC/AML requirements imposed on platforms, general warnings issued).

1. Current Status: Banned

2. Detailed Narrative Explanation:

Retail cryptocurrency trading, including buying, selling, and holding, is explicitly prohibited in Nepal. The Nepal Rastra Bank (NRB), the country's central bank, has consistently maintained a strict stance against all forms of cryptocurrency activities. This prohibition is enforced under existing financial laws, primarily the Foreign Exchange (Regulation) Act, 2019 (originally 1962) and the Nepal Rastra Bank Act, 2002.

The NRB's position is driven by concerns regarding financial stability, consumer protection, potential for illicit activities such as money laundering and terrorist financing, capital flight, and the unregulated nature of cryptocurrencies. The government of Nepal, including the Ministry of Finance, supports the NRB's prohibitive stance.

Historical Background and Regulatory Actions:

The NRB first issued a notice banning Bitcoin on August 13, 2017, citing the Foreign Exchange (Regulation) Act. This was followed by subsequent notices and circulars reinforcing the ban on all virtual currencies and cryptocurrency-related activities. For instance, a notice dated January 23, 2022, reiterated that all activities including use, trade, investment, and mining of virtual currencies and cryptocurrencies are illegal in Nepal. Another notice on August 15, 2022, specifically prohibited trading through platforms like Hyper Fund, emphasizing the risks of money laundering, investment in terrorist activities, fraud, and tax evasion. These warnings have been consistently issued, with the latest noted circular in some reports being from September 2021 or April 2023.

The ban extends to all Nepali nationals, both at home and abroad, as well as foreigners living in Nepal. Authorities have taken enforcement actions, including arrests of individuals involved in cryptocurrency trading and the blocking of access to major international exchanges via VPNs by Internet Service Providers (ISPs). Banks are also directed to monitor and freeze accounts suspected of being linked to cryptocurrency transactions.

Regulatory Environment and Implications:

  • No Licensing or Regulation for Exchanges: As cryptocurrencies are banned, there are no specific regulations or licensing frameworks for cryptocurrency exchanges in Nepal.
  • KYC/AML: While the concept of KYC/AML is crucial in regulated financial environments to prevent illicit activities, in the context of Nepal's crypto ban, these are not applied to crypto platforms as the activity itself is illegal. Instead, authorities focus on identifying and penalizing any engagement in crypto transactions. Banks are mandated to report suspicious activities that might indicate crypto dealings.
  • Penalties: Engaging in cryptocurrency transactions in Nepal can lead to severe penalties, including fines (up to three times the amount involved), imprisonment, and confiscation of assets. Violators may also face charges under cybercrime laws like the Electronic Transaction Act, 2063.
  • Underground Activity: Despite the ban, there are indications of some underground cryptocurrency trading and usage, particularly for remittances, though this carries significant legal risks.
  • Government's Approach to Digital Currency: While banning decentralized cryptocurrencies, Nepal is exploring the concept of a Central Bank Digital Currency (CBDC). The NRB released a concept paper on CBDC in August 2022, indicating an interest in leveraging blockchain technology in a controlled, centralized manner. Pilot testing for a digital rupee is anticipated around 2026. This approach highlights the government's preference for state-controlled digital financial solutions over private cryptocurrencies.

Complexity and Nuance:

The situation is not complex in terms of legal ambiguity – the ban is clear and explicit. The complexity arises from the practical challenges of enforcing a complete ban in a technologically interconnected world, the continued interest among some citizens (particularly youth) in cryptocurrencies, and the use of crypto for remittances despite the prohibition. There's a tension between the government's strict control and the perceived benefits or necessities that drive some individuals towards crypto. However, from a purely legal and regulatory standpoint, the status is unequivocally 'Banned'.

3. Specific, Relevant Text Excerpts:

  • Imperial Law Associates: "The legal framework in Nepal, specifically the Foreign Exchange (Regulation) Act 2019, prohibits cryptocurrency transactions. The Nepal Rastra Bank has issued an official notice banning Bitcoin and other virtual currencies, citing this Act."
  • Imperial Law Associates: "Similarly, NRB, declared that all kinds of activities related to Virtual Currency and Cryptocurrency are illegal in Nepal through a notice dated 23 January 2022. Hence, all kinds of transactions and activities including use, trade, investments, transactions and mining of Virtual Currency and Cryptocurrency are illegal in Nepal."
  • CoinStats (citing Coinfomania with a 2025-06-19 update): "In 2025, Nepal will still have one of the strictest regulations on cryptocurrency in all of Asia and will go against the trend of regulated adoption worldwide. All crypto activities-trade, mining, and payment-are illegal according to the NRB and government under the Foreign Exchange Regulation Act (2019)."
  • CoinStats (citing Coinfomania with a 2025-06-19 update): "Nepal enforces one of the world's toughest cryptocurrency bans. The Nepal Rastra Bank (NRB) prohibits all crypto activities – trading, mining, and payments – under existing financial laws. Violations risk heavy fines and jail time."
  • CompanyNP: "The legal status of cryptocurrency in Nepal is unequivocally clear: it is illegal. The Nepal Rastra Bank Act, 2058 (2002) grants the Nepal Rastra Bank (NRB) the exclusive authority to issue currency and manage the monetary system in Nepal. Section 3 of the Foreign Exchange (Regulation) Act, 2019 (1962) further stipulates that no person shall buy, sell, or possess foreign exchange without the permission of the Nepal Rastra Bank."
  • Moksha Legal Group: "No, cryptocurrency is not legal in Nepal. The NRB has banned it outright, citing concerns over fraud, market manipulation, and lack of consumer protection."
  • Nepal Minute (Sakshi Agrawal): "Nepal Rastra Bank (NRB) has reiterated that the trading and mining of cryptocurrency is illegal in the country... It further went on to say that anyone found “using, subscribing, investing, taking ownership, transferring, remittance, exchanging, mining or other related actions” will be prosecuted according to the laws."
  • Khatapana: "As per NRB's current laws, owning, trading, or mining crypto is considered illegal." (Updated March 24, 2025)

4. Direct, Accessible URL Links to Sources:

(Note: While some sources have "2025" in their titles or update logs, the core information regarding Nepal's crypto ban reflects a consistent regulatory stance established in earlier years and reiterated up to the knowledge cut-off date. The "2025" often refers to the article's publication or last review date, confirming the continued relevance of the ban.)

Web Sources (17)

Sources discovered via web search grounding

Search queries used (6)
  • Nepal cryptocurrency regulation retail trading
  • Nepal Rastra Bank cryptocurrency circulars
  • Legality of cryptocurrency trading in Nepal 2024 2025
  • Nepal crypto ban details
  • Nepal government statements on cryptocurrency
  • Retail crypto trading KYC/AML Nepal
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