Legal Crypto In Nepal

Overview of Cryptocurrency Legality and Regulation in Nepal

Legality of Cryptocurrency in Nepal

In Nepal, cryptocurrencies including Bitcoin are strictly banned and are not considered as legal tender by Nepal Rastra Bank (NRB)– the central bank of Nepal. The NRB has consistently taken this position via public notices such as in 2017 and reiterating in 2023 all cryptocurrency-related transactions, trading, mining and the promotion of it are illegal. This ban is derived from the Foreign Exchange (Regulation) Act (FERA) 1962 which prohibits such transactions involving foreign exchange or other such assets not authorized by the Reserve Bank of India. Offenders may be prosecuted and punished with fines or jail terms. The lack of law on cryptocurrencies makes it so that existing financial laws constitute a blanket ban.

Legislation For the Cryptocurrency Market

Nepal’s legal regime relating to virtual currencies draws its foundation from a mix of statutory laws and the directives of the NRB, motivated by apprehensions of financial fraud, money laundering, and financial danger. The absence of a cryptocurrency regulatory policy further emboldens the NRB’s imperative role in determining the country’s stance on this matter. Following is the list of important regulations and rules of crypto in Nepal:

Remittances and prohibition of Criptomon

Remittances are an important part of Nepal’s economy, representing an estimated 25–30% of its GDP, and most of it comes from migrant workers in Gulf countries, Malaysia, and India. The provision of such funds (routed through licensed banks and MTOs) is crucial to financial stability. The NRB’s restrictive cryptocurrency ban is in part driven by the desire to protect these remittance flows from informal networks. Cryptocurrencies could circumvent official financial systems, weakening the fight against money laundering and diminishing controls over foreign exchange reserves. Nepal’s cultural reliance on conventional banking, as well as lack of digital education on the part of rural populations, further cements the government’s desire for regulated remittances as opposed to decentralized digital assets to enforce the ban.

Exchanges and Trading Venues for Crypto-Coins in Nepal

NRB has imposed a blanket ban, and has made the operation of any and all legal cryptocurrency exchanges in the country illegal. Better safe than sorry. Continued use of international platforms such as Bybit, Binance or Coinbase, even if does work, is illegal. Yet in practice, there are some who take part in non-licensed activities like over-the-counter (OTC) trades using peer-to-peer platforms such as LocalBitcoins or social media groups that are not in compliance and bare high legal risks. Other may be availing the VPNs to access the exchanges on the world and doing crime against the law of Nepal. Unregulated, risky Trades for Cash Informal transactions, cash-for-crypto, itself occasionally occur but are completely unregulated and high-stakes. The NRB has been actively de-motivating these types of activities and urges the general public to report such activities related to the use of cryptocurrency so that they will come under the regulation.

Nepal’s Decentralized Finance (DeFi) The Landlocked Country has caught the DeFi Bug

As a result of the cryptocurrency ban, Nepal has no Decentralized Finance (DeFi) users since the blockchain-based digital currencies cannot be used for financial services without intermediaries. Such DeFi platforms are not only against NRB’s directive but also the Foreign Exchange Act. Their non-compliance is due to this being prohibited by law, in addition to rural area residents having extremely limited internet access and even lower financial literacy, & then there is also blockchain technology which is quite new to the world and is not well understood. Nepal’s continued focus on asserting sovereignty over its financial system, notably to preserve its remittance flows, also narrows DeFi potential. There are no regulatory initiatives for the legalization or regulation of DeFi actions.

Nepal’s Non-Fungible Tokens (NFT) marketplace has been launched.

There is no Non-Fungible Token (NFT) market in the Himalayan nation as of now as the country has banned cryptocurrencies which are used to buy and sell NFTs. NFTs are illegal under the NRB’s regulatory regime. There is no legitimate NFT market, on- or offline, through which to peddle the items — even OpenSea, a worldwide platform operating in over 130 countries, is prohibited by law. Insufficient awareness of blockchain, as well as a legislative prohibition, hinder NFT use. The lack of regulation in regard to blockchain-based assets keeps the NFT markets in a state of hibernation.

Useful Information for Stakeholders

• Consumer protection: Please beware of cryptocurrency scams that target Nepalese citizens using the policy of being illegal as a justification for fraud.
• Domestic financial institutions: Meet with regulated banks in Nepal like Nepal Investment Bank or Nabil Bank to discuss secure investment/savings plans that are 100% compliant with NRB standards.
• 6: Digital Literacy Programs: Join financial education program conducted by Government/NGO (eg MoF Project: You will know about legal financial tools of Nepal)
• Tax Compliance: You should report all financial activities and remittances to the Inland Revenue Department from which penalties will be avoided as cryptocurrencies are not recognized by tax authorities in the country.
• Community Office Reporting Channel: Report illegal cryptocurrency activities anonymously to the NRB’s Financial Intelligence Unit through its official hotline and website.
• Economic Development Lens: Encourage Nepal’s innovative fintech models such as mobile banking sponsored by the NRB to and support them in aiding (NSEP) its financial inclusion agenda.

Conclusion

Nepal’s hard line on cryptocurrency, backed up with Foreign Exchange (Regulation) Act, NRB directives, AML/CFT laws (as outlined in the laws table), is driven by its economic dependence on remittances and cultural trust in regulated money system. No legal exchanges for cryptocurrencies and the dangers of informal alternatives illustrate how tightly Korea is clamping down. DeFi and NFT markets are still not developed owing to legal and infrastructure limitations. The list of important information offers Nepal-focused direction for stakeholders, with a focus on protecting consumers, legal financial options, and community engagement. Extensive regulatory changes would need to be made to facilitate cryptocurrency-related activities, however Nepal currently appears to be more focused on financial security and remittance protection than any sudden change in policy.