The International Monetary Fund flagged growing crypto adoption in Nepal despite a legal ban in a report released Tuesday and urged authorities to monitor the sector closely to protect financial stability and curb illicit flows. The IMF said crypto flows grew markedly between 2019 and 2024, peaking above 13% of GDP in 2021, despite Nepal's 2021 prohibition on all crypto transactions. 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.
Crypto Flows in Nepal Peaked at 13% of GDP in 2021 Despite Ban
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.
The IMF wrote that 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 Fund added that crypto adoption in Nepal warrants close monitoring.
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%.
IMF Urges Nepal Adopt Regulatory Framework Aligned with International Standards
The IMF said a regulatory framework aligned with international standards 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.
The IMF said it will keep engaging Nepal through post-financing assessment and annual Article IV consultations, with crypto oversight now on the agenda.
Expert Says Trading and Remittances Keep Crypto Alive in Banned Markets
Musheer Ahmed, founder and managing director of Finstep Asia, told Decrypt the ban-versus-regulate debate starts with a category error. Ahmed said the technology is not regulated, but the use cases may be regulated, 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.
IMF Pressed El Salvador Scale Back Bitcoin Experiment for Fund Facility
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 that it is 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.
Ahmed said he does not think the El Salvador experiment, per se, has any significant impact on either side, 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.
FAQ
What did the IMF say about crypto adoption in Nepal?
The IMF said in a report released Tuesday that crypto flows in Nepal grew markedly between 2019 and 2024 despite a legal ban, peaking above 13% of GDP in 2021. The Fund urged authorities to monitor the sector closely to protect financial stability and curb illicit flows.
Why does the IMF want Nepal to regulate crypto?
The IMF said a regulatory framework aligned with international standards would help safeguard financial stability and integrity and consumer protection, while limiting circumvention of capital controls or large-scale deposit outflows.
What did expert Musheer Ahmed say about crypto bans?
Musheer Ahmed told Decrypt that trading and remittances are the use cases that persist in banned markets and are exactly the ones worth regulating. He said it makes sense to bring in regulations for consumer and investor protection on the trading front.
