Introduction
Cryptocurrency has taken the global financial world by storm. Countries like the USA, Japan, and India are gradually moving toward regulation, while others such as China and Nepal have opted for a stricter ban.
If you’re wondering “Is cryptocurrency legal in Nepal?” or “What is the punishment for crypto trading in Nepal?”, this article by Onesphere Law Associates provides a clear explanation of the laws, history, punishments, notable cases, and global comparisons.
Is Cryptocurrency Legal in Nepal?
No. Cryptocurrency is completely banned in Nepal.
- Trading, mining, or promoting cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), NFTs, Stablecoins, or DeFi tokens is illegal.
- The Nepal Rastra Bank (NRB), the central bank, has issued multiple public notices declaring that any involvement in crypto is a punishable offense.
- The ban stems from concerns about:
- Money laundering
- Fraud and Ponzi schemes
- Unregulated foreign exchange
- Financial instability
- Tax evasion risks
Timeline of Crypto Regulation in Nepal
| Year/Fiscal | Event |
|---|---|
| 2017 | NRB officially bans Bitcoin under the Foreign Exchange Act |
| 2018 | First nationwide warnings issued through media |
| 2021 | Nepal Police arrest multiple people for crypto trading |
| 2022 (Jan) | NRB bans all activities related to crypto, virtual currency, NFTs, and mining |
| 2022 (Aug) | NRB bans trading via HyperFund, citing money laundering & fraud risks |
| 2023 | CIB investigates 17 people for hundi & crypto transactions |
| 2080/81 | Government reviews international crypto laws but maintains complete ban |
Legal Framework Behind the Ban
Cryptocurrency is prohibited under multiple Nepalese laws:
- Foreign Exchange (Regulation) Act, 1962 (Section 9(c), 12, 17) – prohibits unauthorized foreign exchange.
- Nepal Rastra Bank Act, 2002 (Section 52 & 61) – gives NRB authority to restrict crypto activities.
- Act Restricting Investment Abroad, 1964 (Section 3) – prohibits investments outside Nepal, including crypto.
- National Penal (Code) Act, 2017 (Section 125) – punishes gambling and betting, including crypto betting.
- Electronic Transaction Act (ETA), 2006 (2063) – applies to online fraud and misuse of digital technology.
Punishment for Cryptocurrency in Nepal
If caught engaging in cryptocurrency in Nepal, the following punishments may apply:
- Imprisonment: Up to 3 to 7 years, depending on the Act invoked.
- Fines: Up to 3 times the transaction value.
- Confiscation: Digital wallets, funds, and related assets can be seized.
- Additional Imprisonment: If the offense exceeds NPR 10 million, an extra 3 years jail.
- Failure to Pay Fines: Up to 4 years additional jail.
- Gambling-Related Cases: If crypto is used for betting, imprisonment ranges from 3 months to 1 year, with fines up to NPR 50,000.
- Cybercrime Charges: Under ETA, offenders may face penalties for online fraud and misuse of digital platforms.
What Happens If You Get Caught?
If arrested for crypto-related activities in Nepal:
- The Cyber Bureau of Nepal Police or District Administration Office will investigate.
- You may be charged under:
- Foreign Exchange Regulation Act
- Banking and Financial Institutions Act
- Organized Crime Act
- Electronic Transaction Act
- Seizure of devices: Laptops, mobile phones, and crypto accounts may be confiscated.
- Bank accounts frozen pending investigation.
Why Did Nepal Ban Cryptocurrency?
The government and NRB cite several reasons:
- Financial Instability: Highly volatile nature of crypto poses risk to Nepal’s monetary system.
- Unregulated Market: No central authority or regulation.
- Capital Flight Risk: Crypto enables unlawful foreign exchange and remittance outside legal channels.
- Ponzi & Fraud Schemes: Citizens have fallen victim to pyramid schemes masked as crypto investments.
- Remittance Dependency: Nepal relies heavily on remittance inflows through regulated channels; crypto bypasses these.
- Cybersecurity Risks: Crypto scams and phishing attacks create additional risks.
Global Comparison: How Nepal Stands
| Country | Crypto Status |
|---|---|
| India | Legal, regulated, taxed (30% on gains) |
| China | Completely banned |
| USA | Legal, regulated by SEC & CFTC |
| Japan | Legal with strict licensing |
| Bangladesh | Completely illegal |
| UAE | Regulated and encouraged |
| Nepal | Completely banned |
Nepal’s position is closer to China and Bangladesh, unlike India, USA, or Japan, which allow regulated crypto activity.
Translation & Legal Language in Nepal
Legal language and translation play a crucial role in Nepal’s crypto regulation:
- Terms like blockchain, digital wallet, token, and mining are new to Nepal’s legal vocabulary.
- Misinterpretation of international crypto laws could create compliance risks.
- Proper Nepali-to-English legal translation is essential for treaties, banking compliance, and international cooperation.
- If Nepal ever regulates crypto, multilingual clarity will be vital.
Future of Cryptocurrency in Nepal
Currently, crypto remains illegal. However, Nepal may review its policies in the future by:
- Exploring Central Bank Digital Currency (CBDC).
- Studying India’s taxation model.
- Introducing strict licensing for exchanges if regulation is considered.
- Allowing blockchain technology adoption in non-currency applications (supply chain, land records, digital IDs).
FAQs on Cryptocurrency in Nepal
Q. Can I hold crypto privately in Nepal?
No. Owning, trading, or mining crypto is illegal.
Q. Can I use a foreign crypto app like Binance or Coinbase?
No. Even if the platform is foreign, use inside Nepal is banned.
Q. What happens to seized crypto?
It is confiscated and treated as illegally acquired property.
Q. Is blockchain itself banned?
No. Blockchain technology is legal but must comply with financial laws.
Q. What are alternatives to crypto investment in Nepal?
Stocks, mutual funds, government bonds, and regulated fintech platforms.
Conclusion
Cryptocurrency in Nepal is strictly banned, with heavy penalties including imprisonment, fines, and confiscation of assets. While the rest of the world experiments with regulation, Nepal has chosen prohibition to protect its financial system.
For legal guidance on foreign exchange, financial compliance, and digital regulations in Nepal, contact Law Firm in Nepal, Onesphere Law Associates, one of Nepal’s leading corporate law firms.