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IMF Urges Nepal to Regulate Crypto Amid Rising Usage

Created at 11 Jun · 11:36 AM1 source↑ Market-relevant
IN SHORT

The IMF advised Nepal to establish a regulatory framework for cryptocurrencies, noting a significant increase in crypto flows between 2019 and 2024 despite a ban. The fund warned of potential capital control evasion and deposit outflows.

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Key Numbers

13%peak crypto adoption as % of GDP in 2021
2019-2024period of marked crypto flow growth
$2.6 billioncrypto inflows in 2021
4%crypto adoption as % of GDP in 2023
8%crypto adoption as % of GDP in 2024
5%cross-border crypto flows as % of GDP in early 2025
1Bitcoin purchased daily by El Salvador (claimed)
$1.4 billionfund facility for El Salvador

Who's Involved

International Monetary Fund (IMF)
international financial institution urging crypto regulation in Nepal
Nepal
country where crypto usage is rising despite a ban
Musheer Ahmed
founder and managing director of Finstep Asia, expert on crypto regulation
Nayib Bukele
President of El Salvador, claims nation buys one Bitcoin daily
Jack Dorsey
co-founder of Twitter, developed decentralized messaging app Bitchat
IMF Urges Nepal to Regulate Crypto Amid Rising Usage

↳ Why This Matters

The IMF's warning underscores the global challenge of managing cryptocurrency adoption in countries with existing bans, highlighting potential risks to financial stability and capital controls. It also suggests a shift towards regulation as a more effective strategy than outright prohibition.

Key facts

  • The IMF noted a significant increase in cryptocurrency flows in Nepal between 2019 and 2024, despite a legal ban on crypto transactions implemented in 2021.
  • Crypto inflows peaked at over 13% of Nepal's GDP in 2021, with stablecoins forming a growing share.
  • The IMF recommended Nepal establish a regulatory framework aligned with international standards to safeguard financial stability and consumer protection.
  • An expert suggested that regulating crypto use cases, such as trading and remittances, is a more effective approach than outright prohibition.

The International Monetary Fund (IMF) has urged Nepal to implement regulations for cryptocurrencies, citing a significant increase in crypto flows between 2019 and 2024 despite the country's ban on such transactions. In its report, the IMF noted that crypto adoption, particularly stablecoins, grew markedly, reaching over 13% of GDP in 2021, and warned of risks related to capital control evasion and deposit outflows.

Despite Nepal's central bank declaring crypto trading, mining, and related activities illegal in 2021, the IMF's calculations show inflows peaking at $2.6 billion in 2021. While volumes decreased in subsequent years, they began climbing again in 2024. The IMF emphasized the need for a regulatory framework aligned with international standards to protect financial stability, integrity, and consumer protection.

Musheer Ahmed, founder of Finstep Asia, suggested that regulating specific use cases like trading and remittances is more practical than prohibition. He noted that even in restricted markets, tokenization and real-world asset use cases are emerging. Ahmed believes regulators should balance oversight of cross-border payments with concerns about monetary risks and capital controls.

The IMF has consistently advocated for stricter crypto oversight globally, referencing El Salvador's scaled-back Bitcoin experiment. While El Salvador's President Nayib Bukele claims the country continues to purchase Bitcoin daily, blockchain data is inconclusive. Ahmed commented that El Salvador's experiment highlighted Bitcoin's use as an asset rather than currency, with stablecoins showing more traction in payment rails.

Frequently asked questions

The IMF reported that crypto flows in Nepal grew significantly between 2019 and 2024, despite a legal ban, peaking at over 13% of GDP in 2021.

The IMF urged Nepal to monitor the crypto sector closely and establish a regulatory framework aligned with international standards to protect financial stability and prevent capital control evasion.

No, despite the ban, crypto trading and remittances persist, with stablecoins making up a growing share of the transactions.

An expert suggested that regulating crypto use cases like trading and remittances is a more effective approach than outright prohibition, as the technology itself is not banned but its applications can be.

What Happens Next

01Nepal will continue to engage with the IMF through post-financing assessments and annual Article IV consultations.
02Crypto oversight will remain on the agenda for future IMF engagements with Nepal.

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Cadence

How It Developed

Nepal banned all crypto transactions in 2021.
IMF reported marked growth in crypto flows in Nepal from 2019-2024.
Crypto inflows in Nepal exceeded 13% of GDP in 2021.
IMF urged Nepal to regulate crypto under international standards.
An expert suggested regulation is a more effective tool than prohibition for crypto.

Sources

T1
IMF Urges Nepal Monitor Crypto as Usage Rises Despite BanDecrypt

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