Nepal Compliance Report

Generated 2026-09-22

Comprehensive Framework

Regulatory Overview

Regulatory Status: Dedicated crypto/VA legislation, licensing regime, active enforcement
Key Regulator(s): Nepal Insurance Authority Nepal Insurance Authority, General Nepal Law Commission
Primary Legislation: Regulation, This is the foundational law that empowers the Nepal Rastra Bank to regulate for, Nepal Law Commission - for the Act, Foreign Exchange (Regulation) Act
Travel Rule: Not adopted
Tax Reporting: Legal Status: Cryptocurrency is illegal in Nepal.. Basis of Prohibition: The Nepal Rastra Bank (NRB) has issued multiple directives and circulars prohibiting all activities related to virtual currencies and digital assets. This is primarily driven by concerns related to foreign exchange control violations, money laundering, financial stability risks, and investor protection.. Key Reference: NRB's directives, such as the "Circular regarding illegal activities related to cryptocurrency/virtual currency" (often updated annually or as needed). For example, a notice issued in 2078 Ashwin 29 (October 15, 2021) and subsequently reinforced, explicitly warns against dealing in crypto and highlights the legal penalties.. Relevant Authority: Nepal Rastra Bank (NRB). NRB Website: https://www.nrb.org.np/ (You would typically find specific circulars under "Notices" or "Press Releases" sections, searching for "virtual currency" or "cryptocurrency").

Key Facts

aml Nepal is listed as a "Jurisdiction under Increased Monitoring" by the FATF as of 19 June 2026, meaning it is actively working with the FATF to address strategic deficiencies in its regimes to counter money laundering, terrorist financing, and proliferation financing FATF Nepal The FATF identifies Nepal under increased monitoring, with the most recent statement dated 19 June 2026, and previous updates on 13 February 2026 and 24 October 2025 FATF Nepal Nepal's progress in strengthening measures to tackle money laundering and terrorist financing was analyzed in a follow-up report dated 22 May 2026, which examines the country's progress in addressing technical compliance deficiencies identified in its Mutual Evaluation Report FATF Nepal The FATF follow-up report from 22 May 2026 specifically addresses Nepal's progress in addressing technical compliance deficiencies identified in its MER FATF Nepal Nepal is a member of the Asia/Pacific Group on Money Laundering (APG), which is part of the FATF Global Network of regional bodies FATF Nepal The Nepal Insurance Authority has issued AML directives and guidelines for the insurance sector, indicating that insurance companies are subject to AML/CFT obligations in Nepal Nepal Insurance Authority Nepal's AML/CFT framework covers financial institutions, with the regulatory regime extending to include insurance entities under the supervisory purview of the Nepal Insurance Authority Nepal Insurance Authority No entity has been licensed to operate a cryptocurrency exchange, digital asset service provider, or virtual asset business in Nepal, as virtual assets are not recognized as legal financial instruments in the country FATF Nepal
enforcement Regulator Name: Nepal Rastra Bank (NRB) Entity Targeted: General Public, financial institutions, and any individuals or groups involved in cryptocurrency-related activities. Violation Type: Engaging in, facilitating, or promoting illegal cryptocurrency activities (trading, mining, holding, investment), which are considered violations of foreign exchange regulations and potentially money laundering laws. Penalty Amount: The NRB itself doesn't issue direct "penalties" in these warnings, but the legal framework invoked carries significant penalties. Under the Foreign Exchange (Regulation) Act, 2019 (2076 BS), violations can lead to:. Confiscation of the disputed amount. A fine of up to three times the disputed amount. Imprisonment for up to three years. Confiscation of assets used in the illegal activity. Additionally, money laundering charges under the Asset (Money) Laundering Prevention Act, 2008 (2064 BS) can lead to heavier fines and longer prison sentences. Date: Ongoing, with significant public warnings reiterated in October 2021, January 2022, and subsequent informal statements by officials.
general Circular dated 13 August 2021: Reinstated and reiterated the ban on all transactions involving cryptocurrencies, stating that they are illegal and warning against their use. Public Notice dated 24 January 2022: Explicitly warned the public against the use, trading, mining, or soliciting of virtual currencies, virtual assets, and hype network (pyramid scheme) related transactions, stating that they are illegal and punishable under existing laws. Money Laundering Prevention Act, 2008 (MLPA): While not explicitly naming virtual assets, the broad definition of "assets" and "economic crime" could potentially be interpreted to cover illicit activities involving virtual assets, even in their prohibited status. Money Laundering Prevention Rules, 2008: These rules provide detailed procedures and guidelines for implementing the MLPA. Terrorist Activities (Control and Punishment) Act, 2002: Addresses the financing of terrorism, which is a component of CFT. Relevant Directives from Nepal Rastra Bank (NRB): The NRB issues specific directives and guidelines for financial institutions, and it would likely extend or create new ones for VASPs. Individuals: Obtain and verify identity using reliable, independent source documents (e.g., national ID card, passport, driving license). This would include name, address, date of birth, nationality, and unique identification number. Legal Persons/Arrangements: Obtain and verify legal name, legal form, proof of incorporation/existence, names of directors/partners, legal powers, and beneficial ownership information.
licensing Non-existent. Since cryptocurrencies are prohibited, there is no legal basis or framework for issuing licenses to operate as a crypto custodian. Any entity attempting to provide such services would be operating outside the law. Segregation of Client Assets Rules: Not applicable. As no legal custody services are permitted, there are no rules requiring segregation of client assets. Not applicable. With no regulated custodians, there are no requirements for insurance or bonding. Not applicable. There are no mandates for cold storage or any other form of storage for digital assets, as their possession and transaction are prohibited. Non-existent. There is no definition for a "qualified custodian" within Nepal's legal framework for digital assets because the concept of legal digital asset custody does not exist. No specific pending custody legislation. While there might be ongoing discussions within government circles regarding financial technology and digital transformation, there is currently no public information or official announcements indicating any specific pending legislation aimed at regulating cryptocurrency custody. Any future legislation would first need to address the overarching prohibition of cryptocurrencies themselves. The NRB has consistently issued circulars and public notices warning against the use and trading of cryptocurrencies like Bitcoin since as early as 2017. These notices typically cite the Foreign Exchange (Regulation) Act, 2019 (B.S. 2076) and its subsequent directives as the legal basis for prohibiting foreign exchange transactions (which cryptocurrencies are often categorized as for regulatory purposes) not authorized by the NRB.
sanctions Nepal Rastra Bank (NRB) Notice, August 2021: The NRB issued a notice stating that cryptocurrencies and schemes involving virtual currencies are illegal in Nepal. It warned the public against their use, citing the risk of fraud and financial instability. Legal Reference: Nepal Rastra Bank, Foreign Exchange Management Department Notice dated Bhadra 6, 2078 (August 22, 2021), warning against virtual currencies and pyramid schemes. (Official link directly to this specific notice can be hard to maintain as NRB periodically updates its site; however, it's widely reported and confirmed by NRB officials). General Context: The prohibition is rooted in the Foreign Exchange (Regulation) Act, 2019 (1962 A.D.) and the Nepal Rastra Bank Act, 2058 (2002 A.D.). These acts grant the NRB the authority to regulate foreign exchange and financial stability, under which cryptocurrencies are deemed unauthorized foreign exchange instruments. Foreign Exchange (Regulation) Act, 2019 (1962 A.D.): https://nrb.org.np/contents/uploads/2020/09/Foreign-Exchange-Regulation-Act.pdf (See Section 3, regarding prohibition on foreign exchange transactions without permission). Nepal Rastra Bank Act, 2058 (2002 A.D.): https://nrb.org.np/contents/uploads/2020/09/Nepal-Rastra-Bank-Act.pdf (See Sections 5-7 on the functions, duties, and powers of the Bank). Compliance Requirement: If cryptocurrency were legal or if Nepalese individuals were found to be holding crypto assets subject to a UN sanction, Nepal would be required to freeze those assets. This applies to any assets, including virtual assets. Sanctioned Entity Screening: Nepal's financial institutions (in traditional finance) and relevant authorities are responsible for screening against the UN sanctions lists (e.g., ISIL (Da'esh) & Al-Qaida Sanctions List, DPRK Sanctions List, etc.). If crypto was legalized, VASPs would likewise be required to screen customers and transactions against these lists. Legal Reference: United Nations Security Council Resolutions and the lists they generate.
securities Nepal does not have a specific legal framework governing cryptocurrency or digital asset securities as of 2025–2026; the Securities Board of Nepal (SEBON) regulates securities markets under the Securities Act, 2006, which does not explicitly address digital assets. About SEBON SEBON is the apex regulator of securities markets, established on June 7, 1993, and regulates the market under the Securities Act, 2006. About SEBON No licensing regime exists for cryptocurrency exchanges, brokers, or digital asset service providers because SEBON's licensing authority is limited to stock exchanges, stock brokers, dealers, merchant bankers, fund managers, depository companies, depository participants, and credit rating agencies under existing securities law. About SEBON No entity has been licensed to operate a cryptocurrency exchange or digital asset business in Nepal under any SEBON framework, as no such licensing category exists. About SEBON The practical reality is that cryptocurrency activities operate in a legal vacuum or are implicitly prohibited through central bank restrictions, and market participants face significant legal uncertainty and enforcement risk. A Brief Introduction of Nepalese Securities Market The Securities Board of Nepal (SEBON) is the apex regulator of the securities market, established by the Government of Nepal on June 7, 1993, and is headquartered at Khumaltar, Lalitpur, Nepal. About SEBON SEBON regulates the securities market under the Securities Act, 2006, which is the primary legislation governing securities issuance, trading, and market intermediaries. About SEBON SEBON's Governing Board comprises seven members including one full-time chairman appointed by the Government for a tenure of four years, along with the joint secretary of the Ministry of Finance, joint secretary of the Ministry of Law, Justice and Parliamentary Affairs, a representative from Nepal Rastra Bank, a representative from the Institute of Chartered Accountants of Nepal, a representative from the Federation of Nepalese Chambers of Commerce and Industries, and one member appointed by the Government from amongst securities market management, capital market development, financial, or economic sector experts. About SEBON
stablecoin Stablecoins are not officially classified as e-money, payment tokens, or securities because they, along with all other cryptocurrencies, are considered illegal virtual assets. The NRB broadly refers to them as "virtual currencies" or "cryptocurrencies," and their use or transaction is prohibited. The NRB's stance views them as a threat to financial stability, a means for illegal activities, and outside the purview of the regulated financial system. Since stablecoins are prohibited, there are no prescribed reserve requirements. No entity is legally permitted to issue or operate stablecoins, and therefore, no regulatory guidelines for their reserves exist. Similarly, there is no licensing regime for stablecoin issuers. Issuing stablecoins (or any cryptocurrency) in Nepal would be an illegal activity under current regulations. As stablecoins are not recognized or regulated, there are no legally protected redemption rights. Individuals engaging with stablecoins do so at their own risk, outside the legal framework, and would have no recourse for redemption or protection under Nepalese law. Algorithmic Stablecoin Rules: There are no specific rules or regulations for algorithmic stablecoins (or any type of stablecoin) given the complete ban on virtual currencies. The operational mechanics of a stablecoin (whether algorithmic, fiat-backed, or crypto-backed) are irrelevant when the asset class itself is prohibited. While private stablecoins are banned, the Nepal Rastra Bank has been actively exploring the feasibility of introducing its own Central Bank Digital Currency (CBDC).
status Keep all existing content that is correct Add more citations from the SOURCES list below Add more specific facts (dates, numbers, names) Do NOT remove existing citations or sections Nepal - United States Department of State Nepal flash flood washes away villages, damages roads ... Temporary Protected Status Designated Country: Nepal Nepal AML & Sanctions Compliance
tax Legal Status: Cryptocurrency is illegal in Nepal. Basis of Prohibition: The Nepal Rastra Bank (NRB) has issued multiple directives and circulars prohibiting all activities related to virtual currencies and digital assets. This is primarily driven by concerns related to foreign exchange control violations, money laundering, financial stability risks, and investor protection. Key Reference: NRB's directives, such as the "Circular regarding illegal activities related to cryptocurrency/virtual currency" (often updated annually or as needed). For example, a notice issued in 2078 Ashwin 29 (October 15, 2021) and subsequently reinforced, explicitly warns against dealing in crypto and highlights the legal penalties. Relevant Authority: Nepal Rastra Bank (NRB) NRB Website: https://www.nrb.org.np/ (You would typically find specific circulars under "Notices" or "Press Releases" sections, searching for "virtual currency" or "cryptocurrency"). Current Status: N/A. As crypto is not a legally recognized asset, there is no provision for capital gains tax on its sale. If someone were to "gain" from crypto, it would be from an illegal activity. Current Status: N/A. Income derived from crypto activities (e.g., mining, trading, staking, or wages paid in crypto) is not recognized as legitimate taxable income. However, making money through illegal means can still fall under the general purview of the Income Tax Act if the Inland Revenue Department (IRD) discovers undeclared wealth, which might be subject to general tax rates on unexplained income/assets, often with penalties. This would not be a "crypto tax" but rather a tax on undeclared wealth, regardless of its illicit source. Current Status: N/A. Value Added Tax (VAT) applies to the supply of goods and services. Since crypto transactions are illegal, they cannot be considered a legitimate "supply" for VAT purposes.
travel rule Not Adopted. The concept of the FATF Travel Rule, which requires VASPs to share originator and beneficiary information for virtual asset transactions, is not applicable in Nepal because the underlying virtual asset activities and the existence of regulated VASPs are prohibited. The Nepal Rastra Bank (NRB), the central bank, has consistently issued circulars and warnings against the use, trading, mining, or investment in cryptocurrencies and other virtual assets, citing them as illegal. There is no effective date for the FATF Travel Rule implementation in Nepal, as it has not been adopted. However, the prohibition on virtual assets has been in effect for several years, with the NRB first issuing warnings and directives in 2017, and reiterating them multiple times since then (e.g., in October 2021 and April 2022). Not applicable. Since the Travel Rule is not adopted and virtual asset activities are banned, no threshold amounts for information sharing have been set. (For reference, the FATF generally recommends thresholds of USD/EUR 1,000 for unhosted wallet transfers and USD/EUR 3,000 for VASP-to-VASP transfers, but these do not apply in Nepal). None. There are no legally recognized or regulated Virtual Asset Service Providers (VASPs) in Nepal. Any entity operating as a VASP (e.g., exchanges, custodians, wallet providers facilitating transfers) would be considered illegal and subject to penalties under existing laws.

Sources

This report is AI-generated from publicly available regulatory sources. Last updated: 2026-09-06. View full profile