IMF Urges Nepal to Monitor Crypto Despite Ban

The International Monetary Fund has urged Nepali authorities to establish a regulatory framework for cryptocurrency, warning that digital asset flows have grown markedly since 2019 despite a nationwide prohibition. According to the IMF’s 2026 Article IV Consultation, crypto inflows peaked above 13% of GDP in 2021, driven largely by stablecoins and cross-border payments [1].

Key takeaways

• Crypto inflows in Nepal peaked at over 13% of GDP in 2021, exceeding $2.6 billion despite a legal ban enacted that year [1].
• The IMF recommends Nepal implement regulations aligned with international standards to mitigate risks to financial stability and capital controls [2].
• Stablecoins represent a growing share of crypto activity, which climbed toward 8% of GDP in 2024 after dropping to 4% in 2023 [1].
• An expert suggests regulating specific use cases like trading and remittances rather than maintaining a blanket prohibition on the technology [1].

Flows surge despite 2021 prohibition

Nepal banned all crypto transactions in 2021, with the central bank declaring trading, mining, and related activities illegal [1]. However, IMF staff calculations indicate that inflows were negligible in 2020 before surging to more than $2.6 billion in 2021 [1]. This volume temporarily exceeded 13% of the country's GDP before falling to roughly 4% by 2023 and climbing back toward 8% in 2024 [1]. The Fund noted that stablecoins comprise an increasing portion of these flows, estimating crypto-related cross-border activity at roughly 5% of GDP in early 2025, a figure higher than Bangladesh or Myanmar but significantly lower than Vietnam [1].

Calls for regulatory alignment

The IMF warned that unregulated crypto activity could enable the circumvention of capital controls and trigger large-scale deposit outflows [2]. Consequently, the Fund advised Nepal to implement a regulatory framework that aligns with international standards to safeguard financial stability, integrity, and consumer protection [2]. The report also urged the completion of a Financial Action Task Force action plan to help Nepal exit the watchdog's grey list [1]. Musheer Ahmed, managing director of Finstep Asia, argued that regulation should target specific use cases like trading and remittances, which often persist even in banned markets, rather than applying a blanket ban on the technology [1]. He noted that the "stablecoin sandwich" has gained significant traction in payment rails [1].

Why it matters

The IMF's recommendations arrive as Nepal navigates political changes following protests last year that toppled the Oli government and installed an interim administration [1]. The Fund stated it will continue engaging with Nepal through post-financing assessments and annual consultations, adding crypto oversight to its agenda for future discussions [2]. Establishing oversight is viewed as a critical step for the country to strengthen governance and meet international compliance benchmarks [2].