By Rup Narayan Dhakal–The Nepal Rastra Bank, which is the central bank of Nepal, has repeatedly published notices and directives stating that the transaction of Bitcoin and other cryptocurrencies is illegal in Nepal. It has also added that investing in cryptocurrencies, including Bitcoin, by any Nepalese individual living inside or outside of Nepal is illegal. According to the Nepal Rastra Bank Act 2002 and the Foreign Exchange Regulation Act 2019, cryptocurrencies are not recognized as valid in Nepal.
On 4 April 2023, Nepal Rastra Bank unveiled a comprehensive report assessing the risks associated with cryptocurrency. The report identifies 13 significant risks related to crypto trading within Nepal. According to the report, cryptocurrency poses a potential risk to the country’s foreign exchange reserves. It also has the potential to facilitate money laundering and support terrorist activities. Furthermore, the report highlights that crypto trading does not guarantee adequate protection for financial consumers.
In terms of investment, the report states that cryptocurrencies are insecure and prone to fraudulent activities due to the absence of regulating authority. This lack of regulation may also contribute to an increase in tax evasion. Additionally, the adoption of cryptocurrencies could negatively impact Nepal’s relations and cooperation with international financial agencies. Moreover, it violates Nepal Rastra Bank’s exclusive right to issue currency. Furthermore, the report cautioned that Nepal is at significant risk of capital flight due to investments in cryptocurrencies, despite the country’s prohibition on Nepalis investing abroad. Lastly, cryptocurrencies pose a threat to the country’s foreign exchange holdings.
So, due to the lack of proper regulations and the potential for use in illegal activities, Bitcoin is banned in Nepal. Bitcoin transactions differ from traditional banking transactions as they are not subject to taxation, which could result in potential revenue loss. Furthermore, increased adoption of Bitcoin among Nepalese may impact Nepal’s monetary system. Additionally, Bitcoin’s extreme volatility poses risks and can potentially lead to significant long-term issues. Given the responsibility of maintaining financial stability in Nepal, the Nepal Rastra Bank might perceive Bitcoin as a threat.
On January 8, 2023, Nepal Telecommunications Authority issued a notification instructing all internet service providers (ISPs) to block access to and management of websites, apps, or online networks associated with cryptocurrencies. This action follows the central bank’s ban on cryptocurrency activities, including trading and mining. Additionally, in April 2022, Nepal’s telecommunications authority solicited information from the public regarding individuals engaged in illegal activities involving cryptocurrencies.
The Central Investigating Bureau of Nepal had arrested a number of people from different parts of the country for allegedly being involved in the trading of Bitcoin. When Nepal first announced a lockdown on March 24, 2020, due to covid 19 pandemic, the per-bitcoin rate was 6400 US dollars but it touched a 69000 all-time high point on 10 Nov 2021. So, like in other foreign countries, Nepalese also jumped into bitcoin trading to generate more money even though it is illegal in Nepal. Bitcoin has attracted especially to the young generation who wants more money in a short span of time.
Nepal possesses remarkable proficiency in encryption and blockchain technology, making it a valuable resource for numerous companies in the Western world that rely on Nepali talent to develop cryptocurrency platforms. Bitcoin, being a peer-to-peer cryptocurrency, carries the potential to disrupt various industries. Bitcoin, introduced in 2008 by an anonymous individual named Satoshi Nakamoto, has no controlling authority or issuer. It is not recognized as legal tender by any central bank, and its supply is not regulated by a fractional reserve system. All Bitcoins in existence are held by users within their individual Bitcoin wallets, making it a “virtual currency” distinct from physical currencies such as dollars, euros, or rupees. Bitcoin mining, which involves creating new blocks in the blockchain database, can be performed by anyone worldwide using specialized mining software.