Nepal

Retail_Trading_Status

Banned High Confidence

Analysis ID: #738
Version: Latest
Created: 2025-12-12 04:55
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Workflow Stage: Step 1

Executive Summary

Retail cryptocurrency trading, mining, and investing are strictly illegal in Nepal. The Nepal Rastra Bank (NRB) has issued multiple circulars explicitly banning all activities related to 'virtual currency' and 'cryptocurrency,' citing threats to financial stability and capital flight. Enforcement is active and severe, with the Central Investigation Bureau (CIB) and Department of Revenue Investigation (DRI) frequently arresting individuals for trading, mining, or facilitating crypto transactions under foreign exchange and organized crime laws.

Detailed Explanation

Nepal maintains a strict and comprehensive ban on all retail cryptocurrency activities, making trading, mining, and investing in digital assets illegal for its citizens. This prohibition is enforced through a robust regulatory framework anchored by the Nepal Rastra Bank (NRB), the nation's central bank and primary financial regulator. The legal basis for the ban is rooted in longstanding foreign exchange control laws, primarily the Foreign Exchange (Regulation) Act, 2019 BS (1962), which prohibits dealing in foreign exchange without a license and has been interpreted to include cryptocurrencies. The NRB has issued several explicit directives reinforcing this stance, most notably the NRB Notice on Virtual Currency/Cryptocurrency (NRB Circular 2078/10/09) enacted on January 23, 2022, which declared all activities related to virtual currency illegal and punishable. This follows the earlier NRB Notice on Bitcoin Ban (NRB Notice 2074/04/29) from August 13, 2017, which first explicitly declared Bitcoin transactions illegal under the same foreign exchange act. Furthermore, the Act Restricting Investment Abroad, 1964, prohibits Nepalese citizens from investing in foreign assets, effectively banning the purchase of cryptocurrency on international exchanges and extending the prohibition globally for citizens, regardless of their physical location. The enforcement of these regulations is active and severe, led by the Central Investigation Bureau (CIB) and the Department of Revenue Investigation (DRI), which frequently arrest individuals for trading, mining, or facilitating crypto transactions. These actions are prosecuted under foreign exchange and organized crime laws, with violators facing significant criminal penalties including imprisonment of up to three years and fines of up to three times the transaction amount. The primary drivers of this regulatory approach are the protection of financial stability, the prevention of capital flight, and the preservation of the nation's foreign currency reserves. While private cryptocurrencies are banned, the NRB is exploring the development of a Central Bank Digital Currency (CBDC), or 'Digital Rupee'. As of December 2025, recent arrest data confirms the ban is actively and strictly enforced, with authorities monitoring social media and bank accounts for suspicious transaction patterns, underscoring the high legal risk for any involvement with cryptocurrencies within Nepal's jurisdiction.

Summary Points

Cryptocurrency Regulatory Analysis: Nepal

I. Regulatory Status
* Banned: All retail cryptocurrency activities are strictly illegal.
* The ban explicitly covers trading, mining, and investing.
* Enforcement is active and severe, with frequent arrests.

II. Key Regulatory Bodies
* Nepal Rastra Bank (NRB): The primary regulator and issuer of the ban.
* Central Investigation Bureau (CIB): The primary enforcement agency responsible for arrests.
* Department of Revenue Investigation (DRI): Handles prosecution for foreign exchange violations.

III. Important Legislation
* Foreign Exchange (Regulation) Act, 2019 BS (1962) (Enacted: 1962-01-01)
* The primary legal tool used to criminalize cryptocurrency activities.
* Section 12 prohibits dealing in foreign exchange without a license, which is interpreted to include crypto.
* NRB Notice on Virtual Currency/Cryptocurrency (NRB Circular 2078/10/09) (Enacted: 2022-01-23)
* A comprehensive directive declaring all activities related to virtual currency (mining, trading, usage) illegal and punishable.
* NRB Notice on Bitcoin Ban (NRB Notice 2074/04/29) (Enacted: 2017-08-13)
* The first major public notice explicitly declaring Bitcoin transactions illegal under the Foreign Exchange Regulation Act.
* Act Restricting Investment Abroad, 1964 (Enacted: 1964-01-01)
* Section 3 prohibits Nepalese citizens from investing in any foreign asset, effectively banning the purchase of crypto on international exchanges.

IV. Compliance Requirements
* Not applicable: As all activities are banned, there are no compliance requirements for market participants.

V. Notable Restrictions or Limitations
* Criminal Penalties: Violators face imprisonment (up to 3 years) and fines up to 3 times the transaction amount.
* Active Surveillance: Police monitor social media and bank accounts for suspicious 'high-yield' or foreign transaction patterns.
* No Offshore Loophole: The ban applies to Nepalese citizens globally; investing in crypto while abroad is also technically prohibited under the Act Restricting Investment Abroad.
* Strict Capital Controls: The ban is primarily driven by the need to prevent capital flight and preserve foreign currency reserves.

VI. Recent Developments or Notes
* CBDC Exploration: While private crypto is banned, the NRB is researching a Central Bank Digital Currency (CBDC) or 'Digital Rupee'.
* Analysis Date: This analysis is current as of December 12, 2025.
* Enforcement Status: Recent arrest data from late 2024 and 2025 confirms the ban is actively and strictly enforced.
* Travel Advisory: Travelers to Nepal should ensure they do not transact in crypto while in the country to avoid legal jeopardy.

Full Analysis Report

Nepal maintains one of the strictest anti-cryptocurrency regimes in the world, classified unequivocally as 'Banned'. The legal prohibition is rooted in the Foreign Exchange (Regulation) Act of 1962, which the Nepal Rastra Bank (NRB) interprets to exclude any non-state-issued currency. This stance was formalized through a series of notices, most notably in August 2017 and January 2022, which explicitly criminalized the mining, trading, and holding of digital assets. The government views cryptocurrencies not as financial innovation but as a vehicle for capital flight, tax evasion, and 'hundi' (illegal money transfer) operations that threaten the nation's foreign reserves.

Enforcement in Nepal is aggressive and consistent. Unlike 'Gray-Zone' jurisdictions where bans exist on paper but are ignored in practice, Nepalese authorities actively hunt down violators. The Central Investigation Bureau (CIB) of the Nepal Police and the Department of Revenue Investigation (DRI) frequently conduct raids and arrests. In 2024 and 2025, authorities intensified crackdowns, arresting dozens of individuals—including students and returnee migrants—for involvement in crypto trading rings or mining operations. These cases are often prosecuted under the Foreign Exchange Act or the Organized Crime Act, carrying severe penalties including prison sentences and heavy fines.

The regulatory environment leaves no room for ambiguity. Banks are mandated to block any transaction related to virtual assets and report suspicious activity immediately. There are no licensed exchanges, no 'sandboxes' for crypto startups, and no legal avenues for retail investors to access the market. Even the possession of hardware wallets or the presence of crypto apps on a mobile device can be used as evidence of criminal activity during police investigations.

Despite the harsh ban on private cryptocurrencies, the NRB has shown interest in state-controlled digital currency. The central bank has formed a steering committee to study the feasibility of a Central Bank Digital Currency (CBDC), the 'Digital Rupee,' aiming to modernize the payment system while maintaining strict state control over the money supply. This bifurcation—a total ban on decentralized crypto paired with research into a state-issued digital currency—characterizes Nepal's current regulatory strategy.

Nepal maintains one of the strictest anti-cryptocurrency regimes in the world, classified unequivocally as 'Banned'. The legal prohibition is rooted in the Foreign Exchange (Regulation) Act of 1962, which the Nepal Rastra Bank (NRB) interprets to exclude any non-state-issued currency. This stance was formalized through a series of notices, most notably in August 2017 and January 2022, which explicitly criminalized the mining, trading, and holding of digital assets. The government views cryptocurrencies not as financial innovation but as a vehicle for capital flight, tax evasion, and 'hundi' (illegal money transfer) operations that threaten the nation's foreign reserves.

Enforcement in Nepal is aggressive and consistent. Unlike 'Gray-Zone' jurisdictions where bans exist on paper but are ignored in practice, Nepalese authorities actively hunt down violators. The Central Investigation Bureau (CIB) of the Nepal Police and the Department of Revenue Investigation (DRI) frequently conduct raids and arrests. In 2024 and 2025, authorities intensified crackdowns, arresting dozens of individuals—including students and returnee migrants—for involvement in crypto trading rings or mining operations. These cases are often prosecuted under the Foreign Exchange Act or the Organized Crime Act, carrying severe penalties including prison sentences and heavy fines.

The regulatory environment leaves no room for ambiguity. Banks are mandated to block any transaction related to virtual assets and report suspicious activity immediately. There are no licensed exchanges, no 'sandboxes' for crypto startups, and no legal avenues for retail investors to access the market. Even the possession of hardware wallets or the presence of crypto apps on a mobile device can be used as evidence of criminal activity during police investigations.

Despite the harsh ban on private cryptocurrencies, the NRB has shown interest in state-controlled digital currency. The central bank has formed a steering committee to study the feasibility of a Central Bank Digital Currency (CBDC), the 'Digital Rupee,' aiming to modernize the payment system while maintaining strict state control over the money supply. This bifurcation—a total ban on decentralized crypto paired with research into a state-issued digital currency—characterizes Nepal's current regulatory strategy.

Source Evidence

Primary and secondary sources cited in this analysis

NRB Notice on Prohibition of Virtual Currency/Cryptocurrency primary (regulator)

2022-01-23

"Transactions involving Bitcoin, virtual currencies, cryptocurrencies... are prohibited in Nepal."

Foreign Exchange (Regulation) Act, 2019 (1962) primary (law_text)

1962-01-01

"No person shall deal in foreign exchange except with the leave of the Bank."

Department of Revenue Investigation - Press Release on Crypto Arrests primary (official_government)

2022-03-15

"Filed case against individuals involved in illegal foreign exchange through cryptocurrency."

Police bust major crypto money-laundering ring, 2 men arrested secondary (news)

2025-12-09

"In the current fiscal year 2024-25 alone, 28 cases have been registered and 117 people arrested."

Two arrested from Bhaktapur for crypto mining secondary (news)

2024-06-14

"Police on Friday arrested two people... for allegedly mining cryptocurrency."

CIB arrests 50 for crypto involvement secondary (news)

2024-09-13

"The Central Investigation Bureau (CIB) of Nepal Police has arrested 50 Nepali nationals... for their involvement in cryptocurrency-related activities."