As a researcher with years of experience delving into the complexities of financial systems and digital assets, I find myself consistently intrigued by the dynamic landscape of Nepal’s approach to cryptocurrencies. The recent revelations from the Financial Intelligence Unit’s Strategic Analysis Report 2024 have underscored the need for balanced regulation in this space.
In its 2024 Strategic Analysis Report, Nepal’s Financial Intelligence Unit (FIU) stated that the nationwide prohibition on cryptocurrency transactions is making it challenging for individuals who have fallen victim to financial fraud to file complaints with the relevant authorities.
Digital Asset Ecosystem In Nepal At A Glance
The Financial Intelligence Unit (FIU) functions under the umbrella of Nepal Rastra Bank, which serves as the nation’s central banking authority. Its primary role is to scrutinize and document any transactions that appear suspicious, with a specific focus on those associated with illegal activities such as money laundering and financing of terrorism.
The report highlighted an increase in fraudsters using techniques like “smurfing,” where large transactions are divided into smaller amounts to avoid detection. Additionally, these fraudsters convert illicit funds into digital currencies, making it harder for authorities to trace or freeze the assets.
The FIU further emphasized that many individuals are deceived into investing in digital assets with promises of extraordinary returns. The report noted:
False advertisements lure possible investors into transferring funds to specific bank or e-wallet accounts. Unfortunately, the money deposited isn’t returned as guaranteed later on. In nations such as Nepal, where investing in digital assets like cryptocurrency is prohibited, victims seldom report these scams due to potential consequences.
In response to a ban on digital asset trading and mining implemented in September 2021, the Nepalese Communications Regulatory Body instructed internet service providers (ISPs) to restrict access to cryptocurrency-related websites such as trading platforms, effective January 2023.
Fraudsters often use social media platforms and online ads to trick people into bogus digital asset investment opportunities. Unfortunately, due to the illegality of digital asset trading in Nepal, many victims are reluctant to report such incidents to the authorities, which can make it easier for scammers to continue their activities.
The Financial Intelligence Unit has proposed stronger supervision over cryptocurrency transactions within the nation to prevent unlawful activities. Additionally, the report emphasized the need for increased public education, promoting collaboration among different departments, and establishing a fair regulatory system to combat crypto-related scams more efficiently.
Crypto Regulations In South Asia
As a researcher, I’ve found that Nepal, much like China, Russia, Iran, Bangladesh, among others, has imposed a prohibition on all transactions related to digital assets. In contrast, the neighboring South Asian nations have taken different stances towards these digital currencies.
To give an example, while there’s no absolute ban on digital asset trading in India, it carries a hefty tax burden. The government imposes taxes on the earnings from cryptocurrency trades, but unfortunately, there’s no provision to offset these taxes by claiming losses, which could potentially reduce one’s tax liability.
Contrastingly, Pakistan has made a notable shift in regulation by legalizing digital assets, marking a stark change from its previous skepticism towards crypto. Yet, experts suggest that this regulatory change is more about launching a central bank digital currency (CBDC) rather than endorsing the concept of decentralized cryptocurrencies entirely.
Bhutan might be considered one of the most crypto-friendly nations in its region. The country’s Bitcoin holdings have surpassed $1 billion, largely due to Bitcoin’s price increase. As we speak, each Bitcoin is valued at around $89,856, marking a 0.9% decrease over the past day.
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2024-11-19 08:41