Nepal’s Financial Intelligence Unit (FIU) in its Strategic Analysis Report 2024: revealed that the complete ban on cryptocurrency trading in the country has become a significant obstacle for fraud victims who want to report their case to the authorities.
Nepal’s digital asset ecosystem at a glance
FIU is a branch of Nepal Rastra Bank, the country’s central bank. Monitors and reports suspicious transactions, especially those related to illegal activities such as money laundering and terrorist financing.
The report highlighted an boost in fraudsters using techniques such as ‘smurfing’, whereby enormous transactions are broken up into smaller amounts to avoid detection. Additionally, fraudsters convert illicit funds into digital currencies, making it challenging for authorities to track or freeze assets.
The FIU further highlighted that many people are deceived into investing in digital assets with promises of extraordinary profits. The report noted:
The ads direct the potential victim to deposit an amount into specific bank or wallet accounts. The amount deposited in this way is not later returned as promised. In countries like Nepal, where investing in virtual assets such as cryptocurrency is illegal, victims rarely report complaints about such scams due to the potential consequences.
Nepal prohibited digital asset trading and mining in September 2021. Then in January 2023, Nepal Telecommunication Authority ordered Internet service providers (ISPs) to block access to all cryptocurrency-related websites, including trading platforms.
Social media and online advertising are key channels through which fraudsters lure unsuspecting victims into counterfeit digital asset investing schemes. However, the illegal status of digital asset trading in Nepal has discouraged victims from reporting such incidents to law enforcement, making it even easier for fraudsters.
The FIU has called for tighter supervision of cryptocurrency transactions in the country to curb these fraudulent activities. The report also highlights the importance of increasing public awareness, supporting inter-ministerial cooperation and creating a sustainable regulatory framework to more effectively combat cryptocurrency fraud.
Crypto Regulations in South Asia
Nepal is one of the few countries, along with China, Russia, Iran, Bangladesh and others, that prohibit all digital asset trading activities. However, other South Asian countries have taken different approaches to digital assets.
For example, trading in digital assets is not completely banned in India. However, this is how it is in the country superimposed high tax on profits resulting from cryptocurrency trading, without the possibility of using losses to minimize potential tax liabilities.
For a change, Pakistan recently he took it a significant regulatory turn through the legalization of virtual assets, a radical departure from the previous anti-cryptography stance. However, analysts believe that this policy change is primarily aimed at introducing a central bank digital currency (CBDC) rather than taking full advantage of decentralized cryptocurrencies.
Bhutan is probably the most pro-crypto country in the region. The total supply of BTC in the country recently crossed $1 billion, boosted by cryptocurrency price appreciation. At press time, BTC was trading at $89,856, down 0.9% over the past 24 hours.
Featured image from Unsplash.com, chart from TradingView.com
