The Nepal Financial Intelligence Unit (FIU) in its Strategic Analysis Report 2024 said: revealed that the blanket ban on crypto trading in the country has become a significant obstacle for fraud victims who want to report their case to the authorities.
Digital asset ecosystem in Nepal at a glance
The FIU is a division of Nepal Rastra Bank, the country’s central bank. It monitors and reports suspicious transactions, especially those related to illegal activities such as money laundering and terrorist financing.
The report highlighted an increase in the number of fraudsters using techniques such as ‘smurfing’, where large transactions are divided into smaller amounts to avoid detection. Furthermore, these fraudsters convert illicit funds into digital currencies, making it more difficult for authorities to track or freeze the funds.
The FIU further emphasized that many individuals are tricked into investing in digital assets with promises of extraordinary returns. The report noted:
The advertisements direct the potential prey to deposit an amount of money into certain bank accounts or wallet accounts. The amount so deposited is not refunded later as promised. In countries like Nepal, where investments in virtual assets such as cryptocurrency are illegal, victims rarely come forward with complaints about such scams with possible consequences.
Nepal forbidden digital asset trading and mining in September 2021. Subsequently, in January 2023, the Nepal Telecommunications Authority ordered internet service providers (ISPs) to block access to all crypto-related websites, including trading platforms.
Social media and online advertising are key channels through which fraudsters lure unsuspecting victims into bogus digital asset investment schemes. However, the illegal status of digital asset trading in Nepal has deterred victims from reporting these incidents to law enforcement, further creating an opportunity for scammers.
The FIU has called for stricter supervision of crypto transactions in the country to combat these fraudulent activities. The report also underlined the importance of increasing public awareness, promoting cross-departmental cooperation and creating a balanced regulatory framework to more effectively tackle crypto-related fraud.
Crypto Regulations in South Asia
Nepal is one of the few countries, alongside China, Russia, Iran, Bangladesh and others, that bans all trading activities in digital assets. However, other South Asian countries have adopted different approaches to digital assets.
For example, trading in digital assets is not outright banned in USA. However, the country has done so imposed high tax on profits arising from crypto transactions, without the ability to use losses to minimize potential tax liabilities.
Pakistan, on the other hand, recently taken a major regulatory turn by legalizing virtual assets, a radical departure from its previous anti-crypto stance. However, analysts believe that this policy change is primarily aimed at introducing a central bank digital currency (CBDC) rather than fully embracing decentralized cryptocurrencies.
Bhutan is perhaps the most pro-crypto country in the region. The country’s total BTC supply recently crossed $1 billion, supported by the cryptocurrency’s price increase. BTC is trading at $89,856 at the time of writing, down 0.9% in the past 24 hours.
Featured image from Unsplash.com, chart from TradingView.com