Nepal’s Cryptocurrency Ban Impedes Fraud Reporting by Victims
Nepal's blanket ban on cryptocurrency trading complicates fraud reporting for victims, according to a report by the Financial Intelligence Unit (FIU), which operates under Nepal Rastra Bank. The FIU's Strategic Analysis Report for 2024 outlines the challenges faced by victims of crypto-related scams.
The report reveals that fraudsters employ techniques like "smurfing," where large transactions are divided into smaller amounts to evade detection. Criminals convert illicit funds into digital currencies, making it difficult for authorities to trace these assets. The increase in scams promising high returns on digital assets is a growing concern.
Fraudsters attract victims through advertisements encouraging deposits into specific bank or wallet accounts, after which the funds vanish. In Nepal, where cryptocurrency investment is illegal, victims often refrain from reporting losses due to fear of legal repercussions, creating a barrier for law enforcement in tackling crypto fraud.
Nepal banned cryptocurrency trading and mining in September 2021. In January 2023, the Nepalese Telecommunications Authority directed internet service providers to block access to crypto-related websites, including trading platforms. This crackdown aims to limit exposure to scams spread via social media and online ads. However, the illegal status of cryptocurrency trading hinders fraud victims from seeking justice.
The FIU advocates for stricter monitoring of cryptocurrency transactions to combat fraud. Recommendations include enhancing public education on digital asset investment risks, fostering cooperation among government departments, and developing a balanced regulatory framework to prevent future crypto-related fraud.
Nepal is not alone in imposing strict regulations on digital assets; countries like China, Russia, Iran, and Bangladesh have also banned cryptocurrency trading. In contrast, India has not prohibited crypto trading but imposes high taxes on profits without allowing loss offsets. Pakistan recently decided to legalize virtual assets, signaling a shift towards central bank digital currency (CBDC) development rather than full acceptance of decentralized cryptocurrencies like Bitcoin (BTC).
Conversely, Bhutan has embraced a positive approach toward crypto, accumulating over $1 billion in Bitcoin as its value rises, standing in contrast to its more cautious or restrictive neighbors regarding digital assets.
In summary, Nepal's cryptocurrency trading ban has inadvertently created obstacles for fraud victims who hesitate to report scams due to potential legal consequences. As cryptocurrency-related fraud increases, the FIU calls for improved regulatory measures and greater awareness to protect citizens. Meanwhile, neighboring countries adopt varying strategies, with some exploring digital currencies' potential while others remain cautious or restrictive.