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IMF Sounds Alarm on Crypto Usage in Nepal Amid Ban Pressures

The International Monetary Fund (IMF) has raised concerns about the rising adoption of cryptocurrencies in Nepal, despite an official ban since 2021.

In a recent report, the IMF highlighted that stablecoins and unbacked crypto assets have seen significant growth from 2019 to 2024, prompting a call for closer monitoring by Nepali authorities.

Although the legal framework prohibits crypto transactions, inflows surged to over $2.6 billion in 2021, constituting more than 13% of the nation’s GDP.

By 2023, this volume had declined to roughly 4% of GDP but is projected to rebound to 8% in 2024, primarily fueled by stablecoins.

The IMF urged the establishment of a regulatory framework aligned with international standards to enhance financial stability and consumer protection in Nepal.

Musheer Ahmed from Finstep Asia emphasized the need for regulation of use cases in crypto, such as trading and remittances, rather than an outright ban.

He noted that while some countries restrict crypto, they simultaneously explore tokenization within traditional finance, showcasing the potential for regulated usage.

The fund is also pushing Nepal to progress on its Financial Action Task Force action plan to exit a grey listing status.

Amidst political unrest following protests against social media bans, the IMF's recommendations highlight the growing complexity of managing crypto in the region.

Ongoing engagement between the IMF and Nepal will include discussions on establishing effective oversight for the crypto sector, aligning with global practices.