The Legislative Landscape of Cryptocurrencies in Nepal Prior to 2023

As of January 2022, Nepal presented a unique scenario in the global cryptocurrency context. The country did not have any specific legislation directly regulating cryptocurrencies, leading to an ambiguous legal status for these digital assets. The Nepal Rastra Bank (NRB), Nepal’s central regulatory authority for monetary and financial affairs, had expressed concerns about the use of cryptocurrencies but had not explicitly declared them illegal.

NRB’s Cautionary Stance: In 2017, the NRB issued a notice cautioning the public against engaging in cryptocurrencies, clarifying that Bitcoin and other cryptocurrencies were not recognized as legal tender in Nepal. This notice, while highlighting potential risks associated with cryptocurrency transactions, did not outrightly declare them illegal​​.

Emergence of Crypto Exchange Platforms: Despite the absence of direct legislation prohibiting cryptocurrencies, several crypto exchange platforms emerged in Nepal. These platforms facilitated peer-to-peer trading of cryptocurrencies like Bitcoin and Ethereum, allowing individuals to buy, sell, and store digital assets. However, operating in a legal grey area without specific regulations, these platforms and their users faced challenges, particularly with banking services. Traditional banks were often hesitant to establish relationships with entities involved in cryptocurrency transactions, which limited access to banking services for crypto exchanges and their customers, thereby hindering the development of the cryptocurrency ecosystem in Nepal​​.

Government’s Move Towards Regulation: Recognizing the need for regulation in this emerging financial sector, the Nepalese government formed a committee to study and propose appropriate legislation for the regulation of cryptocurrencies and blockchain technology. This initiative indicated an acknowledgment of the potential benefits of cryptocurrencies and a move towards establishing a regulatory framework​​.

In summary, prior to 2023, Nepal’s approach to cryptocurrencies was characterized by a lack of specific legislation, leading to a grey area in legal status. While the NRB issued warnings about the risks associated with cryptocurrencies, the government’s initiative to explore regulatory frameworks showed a growing recognition of the significance and potential impact of this emerging financial technology​​​​.