Nepal's Crypto Ban Under Foreign Exchange Act 1962: What It Means Today

by Connor Hubbard, 4 Dec 2025, Cryptocurrency Education

21 Comments

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Nepal doesn’t just discourage cryptocurrency - it treats it like a crime. Since 2017, the country has banned all crypto activities under the Foreign Exchange (Regulation) Act, 1962, making it one of only a handful of nations in the world with a total prohibition. Unlike India, which taxes crypto gains but lets people trade, or Pakistan, which regulates exchanges, Nepal says: no Bitcoin, no Ethereum, no mining, no P2P trading - not even if you use a VPN. And the penalties are real.

How the Ban Started - And Why

The ban didn’t come out of nowhere. On August 13, 2017, Nepal Rastra Bank (NRB) issued a notice under Section 12 of the Foreign Exchange (Regulation) Act, 1962. The message was simple: cryptocurrencies aren’t legal tender. They’re not issued by the government. They move money across borders without oversight. And that’s a threat to Nepal’s foreign exchange reserves.

At the time, remittances from Nepalis working abroad made up nearly 25% of the country’s GDP. NRB feared people were using crypto to bypass traditional banking channels, sending money out of the country without reporting it. By 2021, those fears turned into action. The government expanded the ban to cover mining, advertising, and even promoting crypto. In January 2022, they added a clear warning: any business tied to virtual currency is illegal.

The legal backbone? Three laws:

Section 52(1) and Section 61 of the Nepal Rastra Bank Act, 2002 - gives NRB power to monitor suspicious transactions
Section 9(c) of the Foreign Exchange (Regulation) Act, 1962 - bans unauthorized foreign exchange transactions
Section 3 of the Act Restricting Investment Abroad, 1964 - stops citizens from sending money overseas without approval

Violations can land you in jail for up to three years. Fines? Up to three times the value of the transaction. In early 2022, four people were charged in Kathmandu District Court for moving Rs376 million through crypto - a case that sent shockwaves through the underground market.

Who’s Still Using Crypto? (And How)

Despite the ban, crypto isn’t dead in Nepal. It’s just hidden.

Young tech-savvy Nepalis - mostly between 18 and 35 - are still buying and selling. A 2023 survey by Young Innovations Nepal found that 18.7% of them had used crypto. Most used foreign exchanges via VPN. Others did peer-to-peer trades through WhatsApp or Telegram. One Reddit user from Kavrepalanchok bragged about mining Bitcoin using cheap hydropower. Electricity there costs just Rs5.50 per kWh - cheaper than most cities in India.

Reports suggest 15-20% of Nepal’s mining capacity is still active, mostly in rural areas with surplus hydropower. But it’s risky. Many lose money. On Hamro Patro forums, users shared stories of scams - one man lost $1,200 in a fake Bitcoin deal. No recourse. No legal protection. Just silence.

NRB knows it’s happening. Their 2022 annual report admitted they’ve spotted 237 cases of crypto disguised as remittances, totaling Rs1.82 billion. But they’re under-resourced. Only 12 officials have been trained by Chainalysis to track blockchain activity. There’s no official crypto investigation manual. Enforcement is patchy.

Smartphone with VPN and crypto symbols blurred behind traditional Nepali architecture.

The Economic Cost - Remittances, Reserves, and Lost Opportunity

The government says the ban protects Nepal’s economy. But the numbers tell a different story.

Between July and December 2021, Nepal’s foreign exchange reserves dropped 14.7% - from $11.75 billion to $10.03 billion. NRB blamed crypto-related capital flight. But experts like Dr. Bhola Nath Ghimire, former NRB Deputy Governor, argue the ban is making things worse. He points out that crypto could have reduced the cost of remittances. Right now, sending $200 to Nepal costs an average of 6.5% - over $13 in fees. With crypto, that could drop to under 1%.

Remittance inflows fell 7.3% in the first five months of fiscal year 2021-22. That’s $3.26 billion, down from the previous year. NRB’s Chief Economist, Prakash Kumar Shrestha, admitted this trend is linked to crypto use - not because people are sending money out, but because they’re avoiding formal channels altogether.

Meanwhile, Nepal’s digital economy lags. The Asian Development Bank ranked Nepal 38th out of 40 countries in Asia-Pacific for digital financial inclusion. The crypto ban is a big reason why. While India, Indonesia, and even Bangladesh are experimenting with digital currencies and regulated exchanges, Nepal is stuck in 2017.

Is a Change Coming?

There are signs the government is starting to reconsider.

In July 2023, NRB Governor Maha Prasad Adhikari said a central bank digital currency (CBDC) is “under development.” The Ministry of Finance formed a 12-member committee in September 2022 to study global crypto policies. But so far, no recommendations have been made public.

The International Monetary Fund (IMF) has been blunt: the current ban drives activity underground and doesn’t solve the real problems - money laundering, fraud, or capital flight. A 2023 Nepal Article IV Consultation warned the ban might be “counterproductive.”

Some experts think Nepal will follow India’s path - tax crypto, regulate exchanges, but allow trading. Others believe Nepal will go further: legalize blockchain for remittances while keeping speculative trading banned. The World Bank predicts change within 2-3 years. NRB says the ban will stay for at least five more.

CBDC wallet token beside old banknotes and official ban notice, drawn in precision design style.

What This Means for You

If you’re in Nepal:

Buying or selling crypto? You’re breaking the law. No exceptions.
Mining with cheap hydropower? Technically illegal - and risky if caught.
Using a VPN to access Binance or Kraken? Still violates foreign exchange rules.
Receiving crypto from abroad? NRB considers it illegal, even if you didn’t buy it.

There’s no safe way to play by the rules right now. And if you get caught, you’re on your own. Banks won’t help you recover lost funds. Courts won’t enforce crypto contracts. There’s no consumer protection.

For now, the only legal option is to avoid crypto entirely. But that’s not the same as avoiding the trend. Crypto use is growing - quietly, dangerously, and without oversight. The law hasn’t caught up. And until it does, Nepal’s crypto ban remains a paradox: a rule meant to protect the economy, but one that’s pushing people into riskier shadows.

How Nepal Compares to Neighbors

South Asia is split on crypto. Nepal stands alone in its total ban.

India: Taxes crypto gains at 30%, allows trading. No ban.
Pakistan: Requires exchanges to register with anti-money laundering rules.
Bangladesh: Bans crypto, but is testing a CBDC.
China: Banned trading in 2017, but launched a digital yuan used by over 260 million people.

Nepal is one of only 11 countries with a full ban. The rest - including the U.S., U.K., Japan, and Brazil - have frameworks. Nepal’s refusal to adapt isn’t just unusual. It’s becoming economically isolating.

Joe West 4 Dec

Just saw this and had to chime in - Nepal’s ban is wild, but honestly? It’s not surprising. They’ve got remittances making up a quarter of GDP, and if people start using crypto to bypass banks, the whole system could wobble. The NRB’s not being paranoid, they’re being protective. Still, the enforcement is patchy as hell. I’ve heard from friends in Kathmandu who use VPNs to trade on Binance like it’s no big deal. The law’s there, but the will to enforce it? Not so much.

Also, hydropower mining? That’s actually genius. Nepal’s got more water than it knows what to do with. If they ever loosen up, they could become a green crypto hub. Right now, it’s just underground tech hustle.

And yeah, the $13 fee to send money home? That’s robbery. Crypto could slash that to pennies. But until the government realizes regulation > prohibition, we’re stuck in this weird limbo.

Josh Rivera 4 Dec

Oh wow. Another ‘crypto is the future’ post pretending Nepal’s just ‘behind.’ Wake up. This isn’t about ‘innovation’ - it’s about control. People aren’t using crypto because they love blockchain, they’re using it to sneak money out of the country and avoid taxes. And now you want to legitimize that? The ban isn’t outdated - it’s the only thing keeping Nepal’s economy from collapsing into a shadowy crypto swamp.

Also, ‘cheap hydropower mining’? That’s just energy theft. You think the government doesn’t notice when rural villages suddenly have 24/7 power drain? They do. And they’re not stupid.

Stop romanticizing lawbreaking. It’s not rebellion. It’s greed wrapped in tech jargon. 🤦‍♂️

Holly Cute 4 Dec

Okay but let’s be real - the entire ‘crypto ban’ is a classic case of regulatory panic. Nepal’s scared because they can’t track it, so they ban it. That’s like banning cars because you don’t have traffic cameras. Meanwhile, India’s taxing it, Bangladesh’s testing a CBDC, and Nepal’s out here pretending 2017 is still the future.

And the ‘18.7% of youth use crypto’ stat? That’s not a threat - that’s a market signal. They’re not using it to launder money. They’re using it because remittance fees are insane and banks are slow. The real crime here is the government refusing to adapt.

Also, mining with hydropower? That’s sustainable. Nepal’s got more water than it has roads. Why not turn excess energy into economic leverage? Instead, they’re chasing ghosts while the world moves on. 💸

And don’t even get me started on the IMF saying it’s ‘counterproductive.’ If your policy gets called out by the IMF, maybe… just maybe… you’re wrong. 🤷‍♀️

Neal Schechter 4 Dec

As someone who’s worked in financial inclusion in South Asia, I’ve seen this play out before. When governments ban tech instead of regulating it, they don’t stop the behavior - they just make it more dangerous.

In Nepal, people aren’t using crypto because they’re crypto bros. They’re using it because their aunt in Dubai needs to send money home, and Western Union takes 7% and three days. Crypto? Instant, 1%.

The real issue isn’t crypto - it’s the lack of affordable, accessible financial infrastructure. The ban is a Band-Aid on a hemorrhage. And the fact that NRB only has 12 blockchain-trained officials? That’s not enforcement - that’s surrender.

They should be building a digital wallet system that integrates with remittance flows, not chasing people with jail time. The tech’s here. The need’s here. The will? Not yet.

Tisha Berg 4 Dec

I really appreciate how this post breaks down the laws clearly. It’s easy to think ‘crypto bad’ without knowing why. But Nepal’s not being irrational - they’re protecting a fragile economy. Still, I get why young people are turning to it. My cousin in Kathmandu told me he sends money to his sister using Telegram. No fees. No waiting. Just… done.

Maybe the answer isn’t banning it, but making the official system better? Like, if you could send money through a government app with 0.5% fees, would anyone risk jail for a VPN? I think not.

It’s not about crypto being good or bad. It’s about whether the system serves the people. Right now, it doesn’t.

Isha Kaur 4 Dec

India’s 30% tax on crypto is ridiculous, but at least we can trade legally. Nepal’s ban feels like a throwback to the 90s. I remember when we couldn’t buy dollars without paperwork - now we can, and the economy didn’t collapse. Why is crypto any different?

Also, the hydropower mining thing? That’s actually smart. Nepal’s got surplus energy during monsoon season, and right now it just goes to waste. If they taxed crypto mining instead of banning it, they could fund rural infrastructure. Imagine schools powered by Bitcoin miners.

And the fact that 237 cases were flagged? That’s less than 0.001% of the population. This isn’t a crisis - it’s a growing pains moment. They need policy, not panic.

Also, remittances dropping 7.3%? That’s not crypto. That’s global inflation, job losses abroad, and weak banking. Blaming crypto is like blaming smartphones for bad grades.

Let’s stop treating innovation like a crime. The world’s moving forward. Nepal doesn’t have to be left behind.

Glenn Jones 4 Dec

OMG this is the most unhinged thing I’ve read all week. Nepal’s banning crypto? That’s not a ban - that’s a survival tactic. You think they’re just being Luddites? No. They’re watching the global financial system implode and they’re like ‘nah, we ain’t getting dragged into your crypto circus.’

Meanwhile you guys are out here talking about ‘hydropower mining’ like it’s some eco-warrior dream. Bro. You’re talking about people running rigs in their basements with stolen electricity. That’s not innovation. That’s theft. And you’re celebrating it?

And the IMF says it’s ‘counterproductive’? LOL. They say that about everything that isn’t Wall Street-approved. You think they care about Nepal’s economy? They care about their own crypto lobby.

Let them ban it. Let them jail the scammers. Let them protect their currency. We don’t need every country to be a crypto playground. Some of us actually want stability. 🤡

Mariam Almatrook 4 Dec

It is, without a doubt, a profoundly regressive policy - one that reflects not an absence of understanding, but an absence of courage. To criminalize a decentralized, borderless technology in a nation whose economic lifeline is precisely the movement of capital across borders is not only ironic - it is self-sabotaging.

The Foreign Exchange Act of 1962 was drafted when telegrams were state-of-the-art. To invoke it against blockchain is to wield a quill against a nuclear reactor. The NRB’s inability to adapt is not a virtue - it is institutional decay dressed in bureaucratic robes.

And yet, the most tragic dimension lies not in the law, but in the silence of the educated middle class. They know better. They use VPNs. They mine. They trade. But they say nothing. Complicity, in this context, is the true crime.

Chris Mitchell 4 Dec

Banning crypto doesn’t stop it. It just makes it more dangerous.

Regulate. Don’t prohibit.

Simple.

Cristal Consulting 4 Dec

Love how this breaks it down - so clear. I’ve got a friend in Nepal who’s been mining on his cousin’s farm with solar panels. He says the grid’s so unreliable, crypto mining actually helps stabilize local power use. Crazy, right?

But the real win? If Nepal ever opens up, they could become the green crypto hub of Asia. Imagine that.

For now, it’s a shadow economy. But shadows don’t last forever. The light’s coming.

Tom Van bergen 4 Dec

ban crypto because you cant control it so you ban it classic move
same as banning the internet because kids watch youtube
no innovation just fear
they dont get it
crypto is not money
its tech
you cant ban tech
you can only ban people
and they are already doing that
lol

Adam Bosworth 4 Dec

Okay so let me get this straight - Nepal’s banning crypto because it’s ‘unregulated’… but they’re okay with the $13 fee to send money home? That’s not regulation, that’s robbery.

And now they’re jailing people for using a VPN? Bro. That’s not law enforcement. That’s digital fascism.

And don’t even get me started on the hydropower miners. You think they’re doing this for fun? No. They’re doing it because the government failed them. And now you want to punish them for trying to survive?

This isn’t about crypto. It’s about power. And the NRB is terrified of losing it.

Meanwhile, the world’s moving on. Nepal’s just screaming into the void. 😭

Renelle Wilson 4 Dec

This is one of the most nuanced and thoroughly researched pieces I’ve read on the subject. The legal framework is laid out with precision, and the human cost is not ignored - which is rare. Many discussions reduce this to ‘crypto good’ or ‘crypto bad,’ but the reality is far more layered.

Nepal’s economy is built on remittances. The fear of capital flight is not hypothetical. It’s lived. But the response - criminalization - is a blunt instrument that harms the very people it claims to protect. The youth aren’t trying to destabilize the system; they’re trying to survive it.

The fact that the IMF has flagged this as counterproductive is not a coincidence. It is a signal. And signals, when ignored, become warnings.

What is needed is not more enforcement, but more imagination. A regulated digital remittance corridor, perhaps tied to a national CBDC, could turn this crisis into an opportunity. But imagination requires leadership - and right now, leadership is absent.

Thank you for writing this. It’s the kind of clarity we need more of.

Jerry Perisho 4 Dec

One thing no one’s talking about: Nepal’s ban is actually making their currency more vulnerable.

When you ban crypto, you force people into informal channels - hawala, cash couriers, unregulated P2P. Those are way harder to track than blockchain. Crypto is transparent. Cash isn’t.

So ironically, the ban is making money laundering easier, not harder.

And the 12 Chainalysis-trained officers? That’s like having one cop for a city of 30 million.

The real problem isn’t crypto. It’s underinvestment in financial oversight.

Fix the system. Don’t ban the tool.

Manish Yadav 4 Dec

This is why the West is so messed up. You people think everything should be free and open. But Nepal has a culture. A family system. A way of life. You don’t just let some tech bros from Silicon Valley ruin that.

My uncle sent money home for 20 years. He used banks. He paid the fees. He followed the rules. Why should some kid with a VPN get to skip it?

It’s not about crypto. It’s about respect. And if you don’t get that, then you don’t get Nepal.

Doreen Ochodo 4 Dec

Hydropower mining? That’s actually brilliant. Nepal’s got the energy. They just need the will.

Imagine if they taxed it instead of jail it. Fund schools. Build roads. Turn crypto into development.

It’s not about banning tech. It’s about using it right.

Yzak victor 4 Dec

Man, I grew up in Nepal. I’ve seen my dad wait three days to send money to my grandma. Three days. For $200. And they charge 7%.

Now I use crypto. No one knows. I use Telegram. I’m not hurting anyone. I’m just trying to help my family.

They call it illegal. I call it survival.

Don’t punish the people for the system failing.

jonathan dunlow 4 Dec

Let’s stop pretending this is about ‘crypto.’ It’s about control. Nepal’s economy is fragile. Remittances are its heartbeat. And when people start bypassing the official system, the central bank panics.

But here’s the thing - you can’t stop innovation by outlawing it. You can only drive it underground. And underground markets? They’re wild. No rules. No safety. No recourse.

What Nepal needs isn’t a ban - it’s a bridge. A regulated gateway for crypto-based remittances. Let people use it. Tax it. Monitor it. Turn it into a tool, not a threat.

Otherwise, you’re not protecting the economy.

You’re just delaying the inevitable.

Martin Hansen 4 Dec

Wow. So the solution to a country’s financial instability is to let random internet strangers trade digital tokens with zero oversight? Brilliant. Just brilliant.

Meanwhile, real people are losing their life savings to scams. No recourse. No legal protection. Just ‘oh well, crypto is decentralized.’

Thanks for the moral clarity, crypto bros. You’re saving the world one rug pull at a time.

And yes, I’m aware Nepal’s economy is fragile. That’s why we don’t turn it into a gambling den.

Grow up.

Lore Vanvliet 4 Dec

Why is everyone so obsessed with crypto? Because the West can’t stop pushing their tech on everyone else. Nepal has a right to protect its economy. You think we should just let Silicon Valley dictate our financial policy? NO.

And don’t act like you care about the poor. You care about your crypto portfolio.

My cousin got scammed $10k. No police. No justice. Just ‘lol u got ruggd.’

That’s not freedom. That’s exploitation.

Stay out of Nepal’s business. We know what’s best for us. 🇳🇵✊

Frank Cronin 4 Dec

Let me get this straight - you’re advocating for a nation of 30 million people to embrace a system where the only ‘regulation’ is a 20-year-old on Telegram with a fake wallet?

And you call that progress?

Meanwhile, the government is trying to protect the elderly who rely on remittances from being fleeced by anonymous scammers.

But sure. Let’s let crypto bros win. Let’s turn Nepal into the next Venezuela. Because nothing says ‘economic sovereignty’ like a black market for digital ghosts.

Pathetic.