IMF Calls for Nepal to Regulate Rising Crypto Activity Despite Ban

IMF Highlights Rising Crypto Activity in Nepal

The International Monetary Fund (IMF) has called on Nepal to regulate its burgeoning cryptocurrency market, which has persisted despite a nationwide ban. In a recent report, the IMF noted that cryptocurrency activity surged significantly, reaching over 13% of the country’s GDP in 2021, before declining to about 8% in 2024.

The IMF emphasized that this growth, particularly in stablecoins and unbacked crypto assets, demands careful monitoring to protect financial stability and curb illegal practices. The organization suggested that adopting regulations aligned with international standards could help mitigate capital flight and manage deposit outflows effectively.

Cryptocurrency Growth Despite Legal Prohibition

Since the prohibition of cryptocurrency transactions in 2021, when the central bank declared all trading and mining illegal, Nepal has seen a remarkable increase in crypto inflows. Initially minimal in 2020, these inflows skyrocketed to over $2.6 billion in 2021. By early 2025, the IMF estimates that Nepal's crypto activities could represent around 5% of GDP, still lower than Vietnam's 26% but higher than Bangladesh and Myanmar.

Musheer Ahmed, managing director of Finstep Asia, commented on the ongoing debate about banning versus regulating cryptocurrencies, suggesting that outright bans are often ineffective. He argued that while the technology may be unregulated, its applications can and should be managed to protect consumers and investors.

Global Context and Future Steps

The IMF's recommendations align with its broader advocacy for cryptocurrency regulation worldwide, as seen in the case of El Salvador, which recently scaled back its Bitcoin initiatives. The Fund has urged Nepal to implement a Financial Action Task Force action plan to exit its grey list, further underscoring the need for regulatory frameworks.

As Nepal navigates its political landscape following recent protests and a change in government, the IMF’s call for regulatory measures comes at a crucial time. The organization plans to continue its engagement with Nepal through ongoing assessments and consultations, keeping cryptocurrency regulation on the agenda.