Despite a total ban on cryptocurrency since 2017, thousands of Nepalis are still trading Bitcoin, Ethereum, and other digital assets - quietly, carefully, and at serious risk. The Nepal Rastra Bank (NRB) made it clear: no mining, no trading, no holding. Violate the law, and you could face jail time or fines under the country’s cybercrime and foreign exchange regulations. But the ban hasn’t stopped demand. It just pushed it underground.
How People Bypass the Ban
Most traders don’t use official exchanges. Those are blocked. Instead, they turn to P2P (peer-to-peer) trading a system where buyers and sellers connect directly without a central platform. Platforms like Binance P2P are the backbone of this hidden economy. Traders in Kathmandu or Pokhara find buyers through Telegram groups, agree on a price in Nepali rupees, then complete the deal using eSewa, Khalti, or even cash deposits at local banks. The transaction looks like a regular money transfer - until someone looks closer. To access these platforms, users rely on VPNs tools that mask a user’s location and encrypt internet traffic. The Nepal Telecommunication Authority (NTA) blocked hundreds of crypto-related websites in 2021. But a good VPN can bypass those blocks in seconds. Surveys from underground trader communities suggest over 60% of active crypto users in Nepal use a VPN daily. Some even switch between multiple services to avoid detection. Communication happens on encrypted apps. WhatsApp a messaging app widely used for coordinating crypto trades in Nepal and Telegram a secure messaging platform used for organizing underground crypto networks are the main channels. Traders post buy/sell offers, share wallet addresses, and confirm payments. The government has increased monitoring of these apps since 2023, but encryption makes it hard to trace conversations without direct access to devices.Who’s Doing It - And Why
It’s not just tech geeks. Many are young professionals, migrant workers’ families, and small business owners. Nepal receives over $8 billion in remittances every year - mostly from workers in Malaysia, Qatar, and the UAE. Sending money through traditional channels takes days and costs 5-8% in fees. Crypto lets them send value in minutes for under 1%. A worker in Dubai can buy $1,000 worth of USDT, send it to a relative in Kathmandu, who then sells it for NPR via P2P. No bank paperwork. No delays. No middlemen. Others are investors. With inflation hitting 7.2% in 2025 and bank interest rates below 5%, crypto looks like the only real chance to grow savings. Even though it’s illegal, people see Bitcoin as a hedge against currency devaluation. Some even treat it like a side hustle - buying low during market dips and selling when prices rise. The typical trader isn’t reckless. They know the risks. They use separate bank accounts, avoid linking crypto activity to their main accounts, and never use their real names on trading groups. They learn from older traders, follow strict operational security rules, and rarely talk about it outside trusted circles.
The Government’s Crackdown
The NRB doesn’t just issue warnings. They act. In July 2025, the Central Investigation Bureau (CIB) arrested two Indian nationals operating out of a grocery store in Lalitpur. They had moved over Rs 1.5 billion (about $11 million) in crypto transactions. Police seized cash, CCTV gear, and servers. The men were charged under Nepal’s Criminal Code 2074 for illegal hundi transactions and unauthorized use of virtual currency. This wasn’t an isolated case. Since 2022, over 40 people have been arrested for running crypto exchanges or promoting trading. Authorities now monitor bank transaction patterns, flagging frequent transfers to known P2P facilitators. They also track IP addresses linked to blocked crypto sites - even if masked by a VPN. What’s new is the scope. The NRB’s 2025 circular doesn’t just ban crypto trading - it bans everything that enables it. Using a VPN to access Binance? Illegal. Promoting crypto on social media? Illegal. Accepting crypto as payment for goods? Illegal. Even advertising crypto-related services online can lead to prosecution.The Risks Are Real
People who get caught don’t just lose money. They lose freedom. In 2022, a 24-year-old student in Birgunj was jailed for three months after police traced his crypto trades through his bank statements. He had used eSewa to pay for USDT purchases. The trail was clear. He had no legal defense. Others face financial ruin. Banks freeze accounts suspected of crypto activity. Credit scores crash. Some can’t open new accounts for years. One trader in Butwal told a local news outlet (off the record) that after his account was frozen, he lost his business loan and had to sell his car to pay fines. The psychological toll is heavy too. Traders live in constant fear. A sudden police visit. A suspicious message from a trading partner. A bank alert. One wrong move, and everything changes. Many now avoid using their phones for crypto talks, opting for burner devices or public Wi-Fi.
Why Nepal’s Ban Is Falling Apart
Nepal’s stance is extreme. While India is building a regulated crypto framework, Bhutan is testing a national digital currency, and even Bangladesh is considering pilot programs, Nepal clings to its 2017 ban. The government argues crypto threatens monetary control. But the real issue? It’s losing control. The ban hasn’t stopped crypto. It’s made it more dangerous. Underground markets thrive on secrecy, which makes them harder to regulate, tax, or protect. Traders have no recourse if they get scammed. No legal path to recover funds. No consumer protection. And the demand isn’t fading. With over 70% of Nepalis under 35 and tech-savvy, the appetite for digital finance is growing. Every year, more people learn how to use crypto - not because they want to break the law, but because they see no other option.What’s Next?
There’s no sign the government will soften its stance. Enforcement is tightening. Surveillance is expanding. But the underground market is adapting faster. New tools emerge. Better obfuscation methods. More decentralized networks. Legal experts say pressure is building. International financial institutions are asking why Nepal remains isolated. Remittance companies are losing revenue to crypto alternatives. Young people are turning away from traditional banking altogether. The truth? The ban was never going to work. You can’t stop technology with a law. You can only delay it - and make it riskier. As of 2026, underground crypto trading in Nepal isn’t disappearing. It’s evolving. And until the government recognizes that demand is real, enforcement will keep chasing shadows.Is cryptocurrency completely illegal in Nepal?
Yes. Since 2017, the Nepal Rastra Bank has banned all cryptocurrency activities - including buying, selling, mining, holding, and even using VPNs to access foreign exchanges. Violations can lead to fines, asset seizure, and imprisonment under the Criminal Code 2074 and foreign exchange laws.
How do people in Nepal trade crypto if it’s banned?
Most use P2P platforms like Binance P2P, where buyers and sellers connect directly. Payments are made through eSewa, Khalti, or bank transfers, making transactions look like regular money moves. They use VPNs to bypass blocked websites and communicate via encrypted apps like WhatsApp and Telegram to coordinate trades.
Can the government track crypto transactions in Nepal?
They can’t track the crypto itself - blockchain is public but anonymous. But they can trace the fiat side. If you use your bank account or eSewa to pay for crypto, authorities can flag unusual patterns. They also monitor IP addresses and have increased surveillance on messaging apps used by traders.
What happens if you get caught trading crypto in Nepal?
You could face arrest, jail time, and heavy fines. In 2025, two Indian nationals were arrested for moving over Rs 1.5 billion in crypto, charged under Nepal’s Criminal Code. Banks may freeze your accounts, and you could lose access to financial services for years. Some have lost jobs, businesses, or had their assets seized.
Why hasn’t Nepal legalized crypto like India or Bhutan?
Nepal’s central bank fears losing control over monetary policy and foreign exchange reserves. Unlike India, which is creating regulatory frameworks, Nepal sees crypto as a threat to financial stability. It’s a policy rooted in control, not innovation - even as public demand grows.
Comments
Megan Lavery
February 21, 2026 AT 08:51 AMHonestly, this is one of the most human stories I’ve read in a long time. It’s not about breaking laws-it’s about survival. People aren’t trading crypto because they’re rebels. They’re doing it because their families need money, and the system is rigged against them. Banks take 8% to send cash home? That’s robbery. Crypto cuts it to 1%. That’s not a loophole-that’s justice.
I know Nepal’s ban is technically legal, but morally? It’s outdated. You can’t stop people from using technology just because it’s inconvenient for bureaucrats. This isn’t a crime wave. It’s a quiet revolution.
Also, props to the traders who use burner phones and avoid their main accounts. That’s not paranoia-that’s wisdom. They’re not trying to outsmart the system. They’re just trying to feed their kids.
Mae Young
February 21, 2026 AT 20:10 PMOh, wow. Another ‘crypto is freedom’ fairy tale. Let me guess-you also think Bitcoin will save the world from inflation, gravity, and bad haircut choices? The fact that people are risking jail time for ‘remittances’ doesn’t make it noble-it makes it desperate. And let’s not pretend using eSewa to pay for USDT is ‘clever.’ It’s just laundering with a side of delusion.
Also, ‘VPN users are heroes’? No. They’re technically incompetent adults who think masking their IP makes them James Bond. The real hero? The guy who just uses Western Union and doesn’t get arrested.
Trenton White
February 21, 2026 AT 23:25 PMThis is fascinating. I’ve lived in Southeast Asia for years, and I’ve seen similar underground systems emerge around remittances-especially in places with strict capital controls. What’s striking here is how organized it is. P2P, encrypted apps, multiple layers of obfuscation-it’s not chaotic. It’s adaptive.
What’s missing from the article is the cultural context: in Nepal, trust is built through personal networks, not institutions. That’s why Telegram groups work better than banks. The system isn’t broken-it’s just operating on a different logic. One that doesn’t need permission.