Why is Bitcoin Illegal in Nepal?

By now most people are aware that bitcoin and cryptocurrency trade in general is illegal in Nepal. It was only a few months ago we saw a few people arrested for illegal trading under the Nepal Rastra Bank’s (NRB) proclamation that bitcoin was illegal. Since then we’ve seen fewer stories in that regard, which seems to indicate that people (and exchanges) get the idea. Bitcoin, in other words, appears to have been successfully outlawed in Nepal, for the most part. What we don’t always take the time to ask is why?

The easiest way to summarize the issue might be to quote a wide-ranging write-up on regulatory policies around the world, which noted that bitcoin sometimes gets a bad rap in terms of being associated with illegal activities. The suggestion there is that negative headlines about bitcoin’s utility in shady practices can occasionally sway a government or financial institution to view cryptocurrency as less than trustworthy, and to follow up by restricting or banning its use. This appears to be at least part of the issue where Nepal is concerned.

When bitcoin was officially banned in Nepal, the NRB published a notice detailing the decision and the reasons for which it was made. To summarize, the NRB essentially decided that the very essence of bitcoin couldn’t be tolerated. Its untraceable and decentralized nature resulted in the determination that there was no way NRB could trust the currency working outside the law. It’s something other governments and financial institutions have had to grapple with, but most adopted more of a laissez-faire approach in response.

There is also some concern that bitcoin trade of any kind might constitute a violation of existing money laundering laws in Nepal. That would mean that the NRB’s decision to declare the use of cryptocurrency illegal might not have even been necessary in its being made so. Because bitcoin is viewed essentially as an artificial representation of wealth that cannot operate in any official capacity, putting money into it and then moving it does indeed present a money laundering scenario. This too has resulted in investigations in Nepal.

Ultimately, there really isn’t anything particularly complex about the designation. Bitcoin trading is illegal in Nepal simply because the government and major financial institutions view it as a shady currency too easily used for nefarious purposes. It’s a little bit unusual simply in that there are only a few countries around the world that have adopted similar positions. But logically it makes a good amount of sense.

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