In brief
- The IMF said crypto flows in Nepal grew markedly between 2019 and 2024 despite a legal ban, peaking above 13% of GDP in 2021.
- It urged Nepal to regulate crypto under international standards, warning of capital-control evasion and deposit outflows.
- An expert told Decrypt that trading and remittances keep crypto alive in banned markets, making regulation a smarter tool than prohibition.
Nepal banned crypto, but crypto did not leave Nepal.
In a report released Tuesday, the International Monetary Fund (IMF) flagged growing crypto adoption in Nepal despite a legal ban and urged authorities to monitor the sector closely to protect financial stability and curb illicit flows.
“Flows of stablecoins and unbacked crypto assets grew markedly between 2019 and 2024, although adoption remains modest relative to peers, despite legal prohibition on crypto transactions,” the IMF wrote, adding that crypto adoption in Nepal “warrants close monitoring.”
The finding came in the Fund’s 2026 Article IV Consultation, published as its Executive Board completed the seventh and final review under Nepal’s Extended Credit Facility on June 5.
Nepal banned all crypto transactions in 2021, with the central bank declaring trading, mining, and related activity illegal.
Crypto inflows were negligible in 2020, then topped $2.6 billion in 2021, briefly exceeding 13% of GDP, according to IMF staff calculations.
Volumes fell to roughly 4% of GDP by 2023 before climbing back toward 8% in 2024, with stablecoins making up the larger and growing share.
On cross-border flows, the Fund pegged Nepal at around 5% of GDP in early 2025, ahead of Bangladesh and Myanmar but far behind Vietnam at roughly 26%.
The IMF wants a regulatory framework aligned with international standards, saying it “would help safeguard financial stability and integrity and consumer protection, while limiting circumvention of capital controls or large-scale deposit outflows.”
The Fund also pushed Nepal to finish a Financial Action Task Force action plan and exit the watchdog’s grey list.
Musheer Ahmed, founder and managing director of Finstep Asia, told Decrypt the ban-versus-regulate debate starts with a category error.
“The technology is not regulated. The use cases may be regulated,” Ahmed said, adding that countries where crypto is banned or heavily restricted are still opening the door to tokenization use cases involving real-world assets and traditional finance.
Ahmed said the use cases that persist, such as trading and remittances, are exactly the ones worth regulating.
“On the trading front, it does make sense to bring in regulations” for consumer and investor protection, he said, adding that regulators must balance oversight of cross-border payment rails against longstanding concerns around monetary risks and capital controls.
The IMF and crypto
The IMF has spent years pressing governments to rein in crypto, most visibly El Salvador, which scaled back its Bitcoin experiment in December 2024 to land a $1.4 billion fund facility.
The Fund insists the buying stopped, with a spokesperson previously telling Decrypt that “the total amount of government-owned Bitcoin has not increased and that the increase in the Bitcoin Reserve Fund corresponds to movements across government wallets.”
El Salvador’s President Nayib Bukele says otherwise, as he claimed the nation still buys one Bitcoin a day and tweeted, “No, it’s not stopping…..it won’t stop now, and it won’t stop in the future.”
Blockchain data show El Salvador’s wallets growing by roughly 1 BTC daily, though analysts say public records can’t confirm whether those are fresh buys or older coins routed through exchanges.
“I don’t think the El Salvador experiment, per se, has any significant impact on either side,” Ahmed said, adding that while it put the country on the map for virtual assets and drew crypto capital, limited adoption showed Bitcoin is used more as an asset than money.
The real traction, he said, is in payment rails, “especially the stablecoin sandwich, which has gained significant traction.”
IMF’s crypto warning lands as Nepal rebuilds from September’s Gen Z protests, which toppled the Oli government and installed an interim administration under former chief justice Sushila Karki.
The unrest erupted after the government banned 26 social media platforms on September 4, drawing young Nepalis into the streets ahead of one of the deadliest crackdowns in years.
That ban backfired in a familiar way, with tens of thousands of Nepalis downloading Jack Dorsey’s decentralized messaging app Bitchat, which runs over Bluetooth and mesh networks without internet or accounts.
China later ordered the app pulled from its App Store over rules on services capable of “social mobilization.”
The Fund said it will keep engaging Nepal through post-financing assessment and annual Article IV consultations, with crypto oversight now on the agenda.
Decrypt has reached out to the IMF for comment.
