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.