The International Monetary Fund (IMF) has flagged growing crypto adoption in Nepal despite a legal ban, urging authorities to regulate the sector under international standards to protect financial stability and curb illicit flows. In a report released Tuesday, the IMF noted that stablecoin and unbacked crypto flows grew markedly between 2019 and 2024, peaking above 13% of GDP in 2021 before declining and rebounding to around 8% by 2024. The Fund warned that the ban could lead to capital-control evasion and large-scale deposit outflows, and recommended a regulatory framework aligned with Financial Action Task Force (FATF) standards. An expert commented that trading and remittances persist in banned markets, making regulation a smarter tool than prohibition. The IMF's advisory comes as Nepal recovers from political unrest in September 2024, when protests against social media bans led to a government change. The Fund will continue engaging Nepal through annual consultations, with crypto oversight now on the agenda.

Key facts

• IMF report shows Nepal's crypto flows peaked at over 13% of GDP in 2021 despite a legal ban.
• Stablecoins account for the largest and growing share of Nepal's crypto activity.
• IMF warns crypto ban risks capital-control evasion and deposit outflows, urges regulation under FATF standards.
• Expert says trading and remittances persist in banned markets, making regulation preferable to prohibition.
• IMF's crypto advice comes as Nepal recovers from 2024 protests triggered by social media bans.