The Financial Intelligence Unit (FIU) of Nepal, in its Strategic Analysis Report 2024, revealed that the country’s blanket ban on cryptocurrency trading has become a significant obstacle for fraud victims seeking to report their cases to authorities.
Nepal’s digital asset ecosystem at a glance
The FIU is a division of Nepal Rastra Bank, the country’s central bank. It monitors and reports suspicious transactions, including those related to illicit activities such as money laundering and terrorist financing.
The report highlights a rise in fraudsters using techniques such as “smurfing”, where large transactions are broken up into smaller amounts to avoid detection. Additionally, these fraudsters convert illicit funds into digital currencies, making it more difficult for authorities to trace or freeze assets.
The FIU further highlighted that many people are being deceived into investing in digital assets with promises of extraordinary returns. The report noted:
The advertisements entice potential prey to deposit amounts into certain bank accounts or wallet accounts. The amount thus deposited is subsequently not returned as promised. In countries like Nepal, where investing in virtual assets like cryptocurrency is illegal, victims rarely file complaints against such scams due to the potential repercussions.
Nepal forbidden trading and mining of digital assets in September 2021. Subsequently, in January 2023, the Nepal Telecommunication Authority ordered Internet service providers (ISPs) to block access to all crypto-related websites, including trading platforms.
Social media and online advertisements are the main channels through which fraudsters lure their unsuspecting victims into fake digital asset investment schemes. However, the illegal status of digital asset trading in Nepal has discouraged victims from reporting such incidents to law enforcement, further favoring scammers.
The FIU has called for stricter monitoring of crypto transactions in the country to combat such fraudulent activities. The report also highlights the importance of increasing public awareness, fostering inter-ministerial cooperation and creating a balanced regulatory framework to combat crypto-related fraud more effectively.
Crypto Regulations in South Asia
Nepal is one of the few countries, alongside China, Russia, Iran, Bangladesh and others, to ban all digital asset trading activity. However, other South Asian countries have taken different approaches towards digital assets.
For example, trading in digital assets is not completely banned in India. However, the country has imposed high tax on profits arising from crypto transactions, without the ability to use losses to minimize potential tax liabilities.
On the other hand, Pakistan has recently took a significant regulatory shift by legalizing virtual assets, a radical departure from its previous anti-crypto stance. However, analysts believe that this policy change is primarily aimed at introducing a central bank digital currency (CBDC) rather than fully adopting decentralized cryptocurrencies.
Bhutan is perhaps the country most pro-crypto countries in the region. The country’s total BTC reserve recently crossed $1 billion, supported by cryptocurrency price appreciation. BTC is trading at $89,856 at press time, down 0.9% in the last 24 hours.
Featured image from Unsplash.com, chart from TradingView.com
