The IMF has urged Nepal to legalize cryptocurrencies, citing a rise in usage despite a national ban.
The International Monetary Fund (IMF) has observed a notable increase in cryptocurrency usage in Nepal, despite the country's strict prohibition on such digital assets.
As highlighted in the IMF's recent report, the trend toward cryptocurrency adoption in Nepal began to accelerate in 2019. By 2021, transaction volumes had grown to represent more than 13% of the nation's GDP, totaling approximately $2.6 billion. This figure has since stabilized at around 8% by 2024, with stablecoins dominating the transaction landscape.
In 2021, Nepal's central bank enacted a ban on trading, mining, and all cryptocurrency-related activities. However, the IMF's findings reveal that these prohibitions have had little impact. In fact, Nepal's cryptocurrency flows have outpaced those of Myanmar and Bangladesh, although it still trails behind Vietnam.
The IMF has advised Nepalese authorities to transition from outright bans to a regulatory framework that aligns with global standards. Experts from the IMF argue that such a shift could mitigate the outflow of bank deposits and help uphold currency control measures.
The appeal of digital assets for remittances and trading in closed markets like Nepal demonstrates their resilience. Previous attempts to restrict social media access in the country have similarly shown that residents are adept at utilizing decentralized services to bypass limitations.
The IMF plans to keep a close watch on Nepal's financial stability and emphasizes the importance of implementing consumer protection measures within the cryptocurrency sector.
Additionally, the IMF has previously warned that the expansion of the Real World Assets (RWA) market could pose risks to the global financial system and contribute to the emergence of crisis-like scenarios.
