Nepal Crypto Ban Under Foreign Exchange Act 1962: What You Need to Know in 2026

When Nepal banned cryptocurrency in 2017, it didn’t just make a policy change - it drew a hard line in the sand. Today, in 2026, that line still stands. Nepal remains one of only a handful of countries in the world where owning, trading, mining, or even promoting Bitcoin and other digital assets is outright illegal. Not just discouraged. Not just regulated. Banned.

How Nepal’s Crypto Ban Started

It began quietly on August 13, 2017. Nepal Rastra Bank (NRB), the country’s central bank, issued a notice that didn’t make global headlines but changed everything for Nepali citizens. Under Section 12 of the Foreign Exchange (Regulation) Act, 1962, Bitcoin transactions were declared illegal. The reasoning? Cryptocurrencies aren’t issued by any government or central authority. That meant they could move money across borders without oversight - a direct threat to Nepal’s tightly controlled foreign exchange system.

That notice wasn’t the end. In 2021, the ban expanded. The government made it clear: no trading, no mining, no advertising, no peer-to-peer deals. Even using a VPN to access foreign exchanges like Binance or Coinbase became a violation. By January 2022, the rules were tightened again. Any business activity tied to virtual currency - even helping someone buy crypto - was now a criminal offense.

The legal backbone? Three laws:

• Section 52(1) and Section 61 of the Nepal Rastra Bank Act, 2002 - gives NRB power to regulate financial institutions and report suspicious activity.
• Section 9(c) of the Foreign Exchange (Regulation) Act, 1962 - bans unauthorized foreign exchange transactions.
• Section 3 of the Act Restricting Investment Abroad, 1964 - stops citizens from sending money overseas without approval.

Together, these laws turn crypto into a financial crime. Not a gray area. Not a loophole. A clear violation.

What Happens if You Get Caught?

The penalties aren’t warnings. They’re jail time.

Under the Foreign Exchange Act, anyone caught trading crypto can face up to three years in prison. Fines? Up to three times the value of the transaction. In 2022, the Department of Revenue Investigation filed a case against four people for illegally moving Rs376.41 million (about $2.8 million USD) through crypto. That case is still active.

Banks are required to report any suspicious transactions over Rs500,000. If money flows out of Nepal through a digital wallet, even if it looks like a regular remittance, NRB flags it. They’ve identified over 237 such cases between July 2021 and June 2022 - totaling Rs1.82 billion.

Even if you bought crypto while traveling abroad and brought it home? NRB still considers that illegal. Ownership doesn’t matter - the act of holding it within Nepal’s borders is the violation.

The Underground Crypto Scene

You’d think a ban this strict would kill crypto in Nepal. But it didn’t.

Instead, it drove it underground.

In districts like Kavrepalanchok and Nuwakot, where hydropower is cheap and electricity costs as low as Rs5.50 per kWh, people are still mining Bitcoin. One Reddit thread from March 2023 had nearly 90 comments from miners sharing tips on cooling rigs and avoiding detection. Experts estimate 15-20% of Nepal’s mining activity continues despite the ban.

Peer-to-peer trades happen in secret. People use WhatsApp, Telegram, and local Facebook groups to swap cash for crypto. Some use cash deposit services at banks - wiring money to foreign accounts under fake names. A 2023 survey by Young Innovations Nepal found that 18.7% of tech-savvy Nepalis aged 18-35 have still traded crypto. Of those, 63% use VPNs to access foreign exchanges.

But it’s risky. One user on Hamro Patro forum lost $1,200 in a Bitcoin trade after the seller disappeared. No recourse. No law to protect them. Just silence.

Why the Ban? The Official Story

NRB’s argument is simple: protect Nepal’s economy.

Between July and December 2021, foreign exchange reserves dropped 14.7% - from $11.75 billion to $10.03 billion. NRB blamed crypto outflows. Remittances, which make up 22.6% of Nepal’s GDP, fell 7.3% in the first five months of fiscal year 2021-22. Former NRB Governor Dr. Shanker Sharma argued that crypto was siphoning money out of the country, weakening the rupee and destabilizing reserves.

They also point to global volatility. Bitcoin lost 65% of its value in just seven months in 2022. NRB says letting citizens invest in crypto is like letting them gamble with national financial stability.

The Counterargument: What’s Being Lost

But not everyone agrees.

Dr. Bhola Nath Ghimire, a former deputy governor of NRB, pointed out something simple: crypto could make remittances cheaper. Right now, sending money home from the Gulf or the U.S. costs Nepalis an average of 6.5%. With blockchain, that could drop to under 1%. That’s hundreds of millions in savings every year.

And then there’s innovation. While Nepal bans crypto, countries like India tax it. Pakistan regulates it. Even China - which banned trading - launched its own digital yuan with over 260 million users. Nepal is one of only 11 countries with a total ban. The World Bank says this stance is pushing Nepal to the bottom of Asia-Pacific digital finance rankings.

International experts like Dr. Darshana Narayanaswamy of the Asia Foundation call the ban outdated. “134 countries have built regulatory frameworks,” she said in a 2023 policy brief. “Nepal’s refusal to adapt isn’t protecting its economy - it’s isolating it.”

What’s Next? Signs of Change

Despite the hardline stance, cracks are forming.

In July 2023, NRB Governor Maha Prasad Adhikari said the bank was exploring a central bank digital currency (CBDC). Not crypto. Not Bitcoin. But a digital version of the Nepali rupee - fully controlled by the central bank. It’s a quiet shift toward digital money, just not the decentralized kind.

The Ministry of Finance set up a 12-member committee in September 2022 to study global crypto rules. Two years later? No report. No recommendations. But the fact that they’re looking at it at all suggests the ban isn’t permanent.

The IMF warned in its 2023 Nepal report: “The current ban may be counterproductive as it drives activity underground without addressing underlying risks.”

NRB’s own 2023 Financial Stability Report says the ban will last “at least five more years.” But the World Bank’s 2023 Digital Economy Diagnostic predicts change within 2-3 years. The truth? Nepal can’t ignore global trends forever.

What This Means for You

If you’re in Nepal:

• Don’t trade. Don’t mine. Don’t promote. It’s not worth the risk.
• If you already own crypto, don’t try to sell it locally. You have no legal protection.
• If you’re sending money home from abroad, don’t use crypto as a middleman. Use official channels.

If you’re outside Nepal but have ties there - family, investments, remittances - understand this: the ban doesn’t just affect crypto users. It affects how money moves in and out of the country. It affects how Nepalis connect to the global economy.

For now, the law is clear. But the world is changing. And Nepal’s economy - built on remittances, youth, and resilience - may not be able to hold out forever.