The International Monetary Fund has told Nepal to start tracking cryptocurrency activity, warning that local use of digital assets is climbing even though the country officially bans them. The recommendation puts fresh pressure on Kathmandu to deal with a growing underground market that regulators have so far failed to contain.
A ban that isn't working
Nepal's central bank, Nepal Rastra Bank, outlawed crypto trading back in 2021. The rules forbid banks from handling crypto transactions and threaten penalties for individuals who trade. But the prohibition hasn't stopped locals from buying and selling bitcoin, ether, and other coins. Peer-to-peer platforms, Telegram groups, and informal cash deals have filled the gap. Traders simply route around the banking system.
The result is a market that operates in plain sight but outside any official framework. No taxes are collected, no consumer protections exist, and the central bank has no data on how much money moves through these channels.
Why the IMF stepped in
The IMF's call for monitoring is part of its broader engagement with Nepal's economy. The fund has been pushing for better financial oversight across the region, and crypto is a blind spot. Without accurate data, the IMF argues, Nepal can't assess risks like money laundering, capital flight, or sudden shocks to the payment system.
This isn't the first time the IMF has nudged a developing country to regulate crypto instead of chasing an outright ban. The fund's staff often point out that bans are hard to enforce and can push activity further into the black market. Monitoring at least gives authorities a window into what's happening.
The enforcement challenge
Enforcing the ban in a country where mobile money and remittances are already heavily cash-based is tough. Nepal's internet penetration has climbed in recent years, and many young Nepalis see crypto as a way to earn income or save against a volatile local currency. The central bank has blocked some exchange websites, but users quickly switch to VPNs and decentralized platforms.
Local police have made a handful of arrests, but the numbers are tiny compared to the scale of trading. One official told a local outlet last year that they simply don't have the resources to track every transaction.
The IMF's recommendation puts Nepal's central bank in an awkward spot. Admitting the ban isn't working would mean a major policy reversal. But doing nothing risks letting the underground market grow even larger. The government has not yet issued a formal response to the IMF's call.
For now, Nepal's crypto traders operate in a grey zone, and the IMF has made clear that ignoring that reality isn't an option.
