Crypto Currency Law in Nepal: Prosecution of Crypto Cases

Nepal, cryptocurrencies such as Bitcoin, stablecoins, non-fungible tokens (NFTs), and decentralized finance (DeFi) platforms remain a contentious issue due to their outright prohibition under multiple legal frameworks.

 

The government and Nepal Rastra Bank (NRB) have consistently enforced a ban on all cryptocurrency-related activities, citing risks to financial stability, consumer protection, and the potential for illicit activities like money laundering and terrorist financing.

 

This article explores the legal landscape surrounding cryptocurrencies in Nepal, detailing the prohibition, enforcement measures, prosecution challenges, and penalties for violations.

 

Nepal, cryptocurrencies such as Bitcoin, stablecoins, non-fungible tokens (NFTs), and decentralized finance (DeFi) platforms remain a contentious issue due to their outright prohibition under multiple legal frameworks.

 

The government and Nepal Rastra Bank (NRB) have consistently enforced a ban on all cryptocurrency-related activities, citing risks to financial stability, consumer protection, and the potential for illicit activities like money laundering and terrorist financing.

 

This article explores the legal landscape surrounding cryptocurrencies in Nepal, detailing the prohibition, enforcement measures, prosecution challenges, and penalties for violations.

 

 

2.1 Legal Basis for the Ban

 

Ban of use, trading of cryptocurrency has been the hot debatable topic in Nepal. Currently any form of trading and business through Cryptocurrency is banned in Nepal. The ban is imposed on the grounds of following laws: 

a. Section 52(1) and Section 61 of Nepal Rastra Bank Act, 2002 (2058)

b. Section 9(c) of the Foreign Exchange (Regulation) Act, 1962 (2019)

c. Section 3 of Act Restricting Investment Abroad, 1964 (2021) 

 

2.2 Reflection on the ban of Crypto Currency 

Nepal’s prohibition on cryptocurrencies has evolved through a series of regulatory announcements:

 

On 13 August 2017 (2074/04/29), the Government of Nepal made a decisive move by announcing a nationwide ban on Bitcoin for the first time, citing Section 12 of the Foreign Exchange (Regulation) Act, 2019 BS as its legal foundation. Further, the government declared an additional ban on the use, trading and mining of any form of crypto currency on 9th September 2021 (2078/05/24). Again, on 23rd January 2022 (2078/10/09), the government announced prohibition on business and trading relating to virtual currency/crypto currency and network marketing.  

 

Nepal Rastra Bank published another notice on 15th August 2022 (2079/04/3) prohibiting trading through Hyper Fund along with aforementioned activities deeming that trading through such channels increased the risk of money laundering, investment in terrorist activities, cheating and tax evasion. Finally on 13th April 2022 (2079/12/20), Nepal Rastra Bank consolidated the prohibitory notices published earlier and restricted use, involvement, taking membership, investment, ownership, transfer, mining of any form of Virtual Currency/ Crypto Currency (Stablecoins), Non-Fungible Token (NFT), Digital Asset, Decentralized Finance (DeFi), Pyramid based Network Marketing and Hyper Fund.  

 

2.3 Government Ratione

 

On March 2023 (Chaitra 2079), Foreign Exchange Management Department of Nepal Rastra Bank published a Report titled ‘Analysis of Risk relating to Crypto currency’. The report mentioned various risk incurred within transaction and use of crypto currency like coins. It primarily highlighted following challenges that was required for the ban of crypto currency in Nepal.  

 

a. It is entwined with concerns related to financial stability, the protection of consumers, the prevention of money laundering, and the curbing of terrorist financing. The price of crypto is seen to have high fluctuations time and again. Due to the absence of a regulatory body behind it, the risk of investors upon sudden fluctuation and crashes in the currency is high. It is without the control of monetary supply and policy.

 

b. Threat of cyber security risk in crypto currency is always constant. Financial scam has sown its place in crypto currency too. People are known to be prone towards scams like initial coin offerings (ICOs) and Ponzi schemes.

 

c. An unregulated platform could work as a system to fund and store illicitly earned money thus increasing the number of money laundering activities. 

 

Under these laws, the following activities are considered illegal in regards to cryptocurrency in Nepal:

 

a. Buying or selling cryptocurrencies

b. Using cryptocurrency for foreign exchange or remittance

c. Transferring money through unofficial channels like hundi using crypto

d. Crypto-based gambling and betting

e. Mining or operating crypto trading platforms

The prosecution of cryptocurrency-related crimes in Nepal has been inconsistent, often relying on a variety of legal frameworks. In some cases, prosecutors cite the Nepal Rastra Bank Act, 2002 in their charge sheets, while in others, they refer to the Bank and Financial Institutions Act, 2017. This lack of consistency and clarity reflects a limited understanding of cryptocurrencies among government attorneys.

 

Additionally, the government can invoke Section 3 of the Act Restricting Investment Abroad, 2021, to prosecute individuals involved in cryptocurrency-related activities. As per the official report of Central Investigation Bureau (“CIB”)In October 2017, the (CIB) of the Nepal Police arrested seven individuals for operating a Bitcoin transaction business across various regions of the country. This marked the first instance of such action, and the case was prosecuted under the following two laws:

 

a. Nepal Rastra Bank Act, 2002 (2058)

b. Foreign Exchange (Regulation) Act, 1962 (2019)

 

On 3rd January 2022, several individuals were arrested by the Metropolitan Crime Investigation Branch, Baneshwor, for trading cryptocurrency. The charges were brought under the Banking and Financial Institutions Act. In another case the same month, a family in Kalopul, Kathmandu, was arrested following an investigation by the Department of Revenue Investigation. The investigation revealed that the family had invested in illegal cryptocurrency and was using e-scroll for foreign exchange transactions in U.S. dollars. The department recommended the seizure of funds and a three-year prison sentence for the primary accused.

 

Due to a lack of clear legislation, cryptocurrency is not recognized as a digital asset in Nepal. It is not considered legal tender, nor is it recognized as foreign currency under the Foreign Exchange Regulation. Consequently, its use for payments and monetary exchange has been banned.

 

Using unofficial channels such as hundi for international transactions is prohibited. Purchasing cryptocurrency from abroad and sending payments through such channels is also illegal. Many arrests have been made under organized crime charges related to the illegal transfer of currency via Bitcoin. Authorities have also made arrests connected to betting and gambling using cryptocurrency.

 

In the year 2023, the CIB investigated 17 Nepali nationals involved in hundi and cryptocurrency transactions. These individuals were prosecuted under the Nepal Rastra Bank Act and the Organized Crime Act. Additionally, casinos in Nepal have become hubs for illicit cryptocurrency transactions. Prosecutions related to Bitcoin dealings are inconsistently handled, with some cases falling under the NRB Act and others under the Bank and Financial Institutions Act. 

 

 

The prosecution of cryptocurrency-related offenses in Nepal faces several key challenges, which are outlined below:

 

a. Lack of Specific Legislation: Recently, Most of the Countries around the globe has been developing specific law related to cryptocurrency. Meanwhile, the absence of a properlegal framework for cryptocurrencies in Nepal has led to inconsistent and fragmented prosecution efforts.

b. Regulatory Ambiguity: Law enforcement agencies often rely on different laws for similar offenses, creating confusion and legal uncertainty.

c. Need for Clear Legal Guidelines: There is a growing consensus on the necessity of clear, comprehensive legislation and regulatory frameworks tailored to digital assets and blockchain technology.

d. Limited Technical Expertise: Many law enforcement personnel and prosecutors lack sufficient understanding of the technical aspects of cryptocurrency, hindering effective investigation and prosecution.

e. Jurisdictional Overlap: Multiple agencies share authority over crypto-related offenses, often resulting in unclear responsibilities and delays in enforcement.

 

In recent years, Nepal has witnessed a notable surge in cryptocurrency-related cases, despite a clear legal ban enforced by the Nepal Rastra Bank (NRB). The rising global popularity of digital currencies has prompted many individuals in Nepal to engage in crypto trading, investment, and cross-border fund transfers through unofficial and often illegal channels. Consequently, law enforcement bodies such as the Central Investigation Bureau (CIB) and the Department of Revenue Investigation (DRI) have reported a growing number of cases involving unauthorized cryptocurrency transactions, illegal foreign currency exchange, and the use of informal remittance methods like hundi.

 

The increasing misuse of international trading and payment platforms—including Binance, KuCoin, Cash App, Coinbase, Bybit, and various online gambling applications—has significantly contributed to the rise in crypto-related crimes across the country. These platforms, although legal in other jurisdictions, are being accessed illegally in Nepal using VPNs and unregulated payment methods, raising serious concerns regarding financial security, money laundering, and regulatory enforcement.

 

Punishment for crypto currency crimes depends on which act the public prosecutor invokes. On the basis of different Act, different level of punishment has been pescribed as provided below:

Act	Punishment
Nepal Rastra Bank Act, 2002 (2058) (Section 95 (1))	Confiscation of property, Fines up to three times the value of the property, Imprisonment up to 7 years or both
Foreign Exchange (Regulation) Act, 2019 (1962) (Section 17 (1))	Confiscation of property, Fines up to three times the value of the property, Imprisonment up to 7 years or both, If fine is not paid: imprisonment up to 4 years based on the magnitude of the offence, If amount involved is 10 million NPR or more: additional imprisonment up to 3 years
National Penal (Code) Act, 2017 (2074) (Section 125 – Prohibition of Gambling or Betting)	First offense: imprisonment up to 3 months or fine up to NPR 30,000, Second offense: imprisonment up to 1 year and fine up to NPR 50,000, Subsequent offenses: additional imprisonment up to 3 months and fine up to NPR 10,000 for each

 

Date of Publication: 13 April 2025

 

Disclaimer: This article is provided for informational purposes only and does not constitute legal advice. It reflects the laws and practices in Nepal as of April 13, 2025. Readers are advised to consult qualified legal professionals for guidance on specific matters.