Emily Walker
Nepal’s Financial Intelligence Unit (FIU) disclosed in its 2024 Strategic Analysis Report that the country’s prohibition on cryptocurrency trading is hindering fraud victims from approaching the authorities with their complaints. Read more here.
Overview of Nepal’s Digital Asset Landscape
The FIU operates under the Nepal Rastra Bank, which is the nation’s central banking entity, responsible for detecting and reporting dubious transactions, especially those associated with illegal activities like money laundering and terrorism funding.
The report pointed out a rise in scammers utilizing a method known as “smurfing”, which involves breaking large transactions into smaller ones to evade detection. Additionally, these scammers are shifting their illicit earnings into digital currencies, complicating efforts for authorities to track or seize these funds.
The FIU also noted that many victims are tricked into investing in digital assets through enticing offers of high returns. The report mentioned:
Advertisements lure victims to deposit money into certain bank or wallet accounts. Following this, the deposited funds are often not returned as guaranteed. In Nepal, where investments in virtual assets like cryptocurrency are prohibited, victims are typically reluctant to report such scams due to fear of consequences.
Since implementing a ban on digital asset trading and mining in September 2021, Nepal’s authorities further instructed internet service providers to restrict access to all cryptocurrency-related websites as of January 2023.
Fraudsters leverage social media and online ads to ensnare unsuspecting individuals into fraudulent digital asset investment schemes. However, the illegality of digital trading in Nepal has led victims to avoid reporting these crimes to the police, thus empowering the scammers.
The FIU is advocating for tighter regulation of cryptocurrency dealings within the country to mitigate fraud. The report highlights the need for heightened public awareness, enhanced cooperation among various departments, and a balanced regulatory environment to more effectively tackle issues related to crypto fraud.
Cryptocurrency Regulations Across South Asia
Nepal stands among a small group of nations, including China, Russia, and Iran, in completely banning all activities related to digital assets. However, South Asian countries exhibit diverse regulatory stances towards cryptocurrencies.
In India, digital asset trading isn’t completely prohibited; instead, there is a high tax imposed on profits from crypto transactions, with no provision for offsetting losses.
Meanwhile, Pakistan has shifted its regulatory framework by legalizing virtual assets, a significant change from its previous anti-cryptocurrency policies. However, experts suggest that this change primarily aims to facilitate the introduction of a central bank digital currency (CBDC) rather than fully accepting decentralized cryptocurrencies.
Bhutan appears to be the most favorable toward cryptocurrencies in the region, with the total Bitcoin holdings surpassing $1 billion due to the recent price increases. Currently, Bitcoin is trading at $89,856, reflecting a decrease of 0.9% over the past day.
