Crypto Adoption Thrives in Nepal Despite Official Ban, IMF Warns
KATHMANDU, Nepal – Despite a nationwide ban on cryptocurrency transactions, adoption of digital assets is growing in Nepal, prompting the International Monetary Fund (IMF) to urge authorities to enhance monitoring of the sector to safeguard financial stability and prevent illicit financial flows.
In a report released Tuesday, the IMF noted a “marked growth” in stablecoin and unbacked crypto asset flows between 2019 and 2024. While acknowledging that adoption remains modest compared to regional peers, the Fund emphasized that the trend “warrants close monitoring” given the legal prohibition on crypto activities.
This finding was part of the IMF’s 2026 Article IV Consultation, published as its Executive Board concluded its seventh and final review of Nepal’s Extended Credit Facility on June 5. Nepal officially banned all cryptocurrency transactions in 2021, with the central bank declaring trading, mining, and related activities illegal.
IMF staff calculations indicate that crypto inflows, which were negligible in 2020, surged to over $2.6 billion in 2021, briefly representing more than 13% of Nepal’s Gross Domestic Product (GDP). By 2023, these volumes had decreased to approximately 4% of GDP, before climbing back to around 8% in 2024, with stablecoins constituting the larger and expanding portion of these flows.
Regarding cross-border flows, the IMF estimated Nepal’s crypto engagement at around 5% of GDP in early 2025. This places Nepal ahead of countries like Bangladesh and Myanmar but significantly behind Vietnam, which stands at approximately 26%.
The IMF advocates for a regulatory framework that aligns with international standards. Such a framework, the Fund stated, “would help safeguard financial stability and integrity and consumer protection, while limiting circumvention of capital controls or large-scale deposit outflows.” Additionally, the IMF pressed Nepal to finalize its action plan with the Financial Action Task Force (FATF) and be removed from the FATF’s grey list.
Musheer Ahmed, founder and managing director of Finstep Asia, suggested that the debate between banning and regulating crypto stems from a fundamental misunderstanding. “The technology is not regulated. The use cases may be regulated,” Ahmed explained, noting that countries with strict crypto bans are still exploring tokenization for real-world assets and traditional finance. He argued that the persistent use cases, such as trading and remittances, are precisely those that merit regulation.
“On the trading front, it does make sense to bring in regulations” for consumer and investor protection, Ahmed said. He also highlighted the need for regulators to balance oversight of cross-border payment systems with existing concerns about monetary risks and capital controls.
The IMF has consistently urged governments to regulate the cryptocurrency sector. A notable instance involved El Salvador, which scaled back its Bitcoin experiment in December 2024 to secure a $1.4 billion fund facility. The IMF maintains that El Salvador ceased its Bitcoin purchases, with a spokesperson previously stating that “the total amount of government-owned Bitcoin has not increased and that the increase in the Bitcoin Reserve Fund corresponds to movements across government wallets.”
However, El Salvador’s President Nayib Bukele has offered a different account, asserting that the nation continues to purchase one Bitcoin daily and tweeting, “No, it’s not stopping…..it won’t stop now, and it won’t stop in the future.” Blockchain data indicates a daily growth of approximately 1 BTC in El Salvador’s wallets, though analysts caution that public records cannot definitively confirm whether these are new acquisitions or older coins being moved through exchanges.
Ahmed believes the El Salvador experiment has had limited impact. While it brought the country attention in the virtual asset space and attracted crypto capital, its limited adoption suggests Bitcoin is primarily used as an asset rather than a currency. He pointed to payment rails, particularly stablecoin transactions, as the area demonstrating significant traction.
The IMF’s warning on crypto comes as Nepal is still recovering from widespread protests in September, which led to the ousting of the Oli government and the installation of an interim administration. The unrest was triggered by the government’s ban on 26 social media platforms, prompting large-scale demonstrations by young Nepalis. The social media ban, in turn, saw a surge in the use of decentralized messaging apps like Bitchat, which operates without internet connectivity. China later ordered the app removed from its App Store due to concerns about its potential for “social mobilization.”
The IMF plans to continue its engagement with Nepal through post-financing assessments and annual Article IV consultations, with cryptocurrency oversight now a key agenda item.
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