Underground Crypto Trading in Nepal: How It Works and Why It Persists

Despite a total ban on cryptocurrency since 2017, underground crypto trading in Nepal is not just alive-it’s thriving. The Nepal Rastra Bank (NRB) made it clear: no buying, selling, mining, or even holding Bitcoin or any digital currency is allowed. Violators face fines, imprisonment, and asset seizures under cybercrime and foreign exchange laws. Yet, people keep doing it. Not in small numbers. Not as a fringe curiosity. But as a full-blown, technically sophisticated shadow economy. Why? Because the demand never went away. For many Nepalis, crypto isn’t about getting rich overnight. It’s about sending money home, investing abroad, or simply accessing financial tools the banking system refuses to provide. How are they doing it? And how are authorities trying to stop them? Here’s what’s really happening on the ground.

How Underground Crypto Trading Works in Nepal

The most common method is peer-to-peer (P2P) trading. Traders use platforms like Binance P2P, where buyers and sellers connect directly. No exchange handles the money. No central server stores the data. Instead, one person sends Nepali rupees through eSewa or a bank transfer, and the other sends Bitcoin or USDT directly to their digital wallet. To make this work, users need to hide their online activity. That’s where VPNs come in. Over 70% of active crypto traders in Nepal use a Virtual Private Network, according to informal community surveys. These tools mask their real IP address, letting them access blocked websites like Binance, Kraken, or Coinbase. The Nepal Telecommunication Authority (NTA) blocked over 120 crypto-related domains in 2021, but new ones pop up daily. Traders switch domains, change servers, and use encrypted aliases to stay ahead. Telegram and WhatsApp are the real hubs. Not for buying and selling directly, but for coordination. A trader might post: “Need 0.5 BTC, paying via eSewa. DM if you have.” The conversation happens in private chats. Payment proof is sent as screenshots. No public records. No traceable trail. Some even use cash-in-hand deals. A buyer meets a seller in a café, pays in rupees, and gets a QR code scanned for the crypto transfer. These face-to-face trades are rare but growing in urban areas like Kathmandu and Pokhara.

The Risks Are Real-And Getting Worse

The government isn’t just talking. It’s acting. In July 2025, the Central Investigation Bureau (CIB) arrested two Indian nationals operating a crypto ring out of a grocery store in Lalitpur. They had moved over Rs 1.5 billion (about $11 million) in digital assets. Police seized cash, CCTV equipment, and transaction logs. The men were charged under Nepal’s Criminal Code 2074 for “unauthorized use of virtual currency” and “illegal hundi transactions”-a colonial-era law originally meant to stop underground money transfer networks. This wasn’t an isolated case. In 2022, at least 12 Nepali citizens were arrested for running crypto exchange services. In 2025, digital raids increased. Authorities now monitor bank transaction patterns, flagging repeated transfers to known P2P wallet addresses. They track VPN usage logs from internet service providers. Even encrypted messages aren’t safe-Nepal’s cybercrime unit has hired foreign experts to analyze metadata from WhatsApp and Telegram. The penalties? Up to five years in prison and fines of up to Rs 5 million. Some traders have lost their homes, cars, and savings after their bank accounts were frozen during investigations. And the psychological toll? Many traders live in fear. They change phone numbers. Avoid social media. Never talk about crypto in front of family. One trader, who asked to remain anonymous, said: “I don’t sleep well anymore. Every time my phone rings, I think it’s the police.”

Why the Ban Keeps Failing

Nepal’s ban is one of the strictest in Asia. India, Pakistan, and Bangladesh all have regulations-but not outright bans. Even Bhutan, a country with similar cultural and economic ties, is testing its own blockchain-based payment system. So why does Nepal stick to prohibition? The NRB argues that crypto threatens monetary control. It fears untraceable capital flight. It worries about money laundering through digital assets. And it sees no value in allowing a system outside its control. But the data tells a different story. Remittances make up over 20% of Nepal’s GDP. Most come from workers in Malaysia, Qatar, and Saudi Arabia. Traditional channels like Western Union and MoneyGram charge high fees and take days. Crypto transfers? Done in minutes, for less than 1% in fees. For many families, crypto is the only affordable way to receive money from abroad. A mother in Dharan receives Bitcoin from her son in Dubai, converts it to NPR via a trusted P2P contact, and uses it to pay her daughter’s school fees. No bank. No paperwork. No delay. The ban doesn’t stop this. It just forces it underground.

Who’s Really Trading?

It’s not just tech bros or speculators. The biggest group? Young professionals and migrant workers’ families. They’re not trying to get rich. They’re trying to survive. Then there are small business owners. A shopkeeper in Birgunj accepts USDT for goods because customers from India pay faster that way. A mechanic in Butwal uses crypto to buy spare parts from China, bypassing slow and expensive import restrictions. Even students are involved. A 19-year-old in Pokhara told a journalist: “I learned how to trade crypto so I could send money to my sister in Malaysia. She’s studying nursing. The bank wouldn’t let me send it without a letter from her university. Crypto was the only way.” The traders aren’t criminals. They’re people using a tool the system won’t let them have.

How Authorities Are Fighting Back

The NRB’s 2025 circular went further than before. It didn’t just ban crypto transactions-it banned the tools used to access them. That means:

• Using a VPN to reach Binance is illegal
• Advertising crypto services-even on Facebook-is a crime
• Accepting crypto as payment for goods or services is punishable
• Running a P2P trading group on WhatsApp is a criminal act

Enforcement is now a joint effort. The NRB works with the Nepal Police’s Cyber Division, the Financial Intelligence Unit, and even telecom companies. ISPs are required to log and report suspicious traffic. Banks must flag repeated transfers to known crypto wallet addresses. In 2025, over 200 investigations were opened. More than 40 people were charged. The government claims these actions have “significantly reduced” crypto activity. But the underground market shows no signs of slowing down.

The Future: Will Nepal Change Its Mind?

Legal experts say the ban is unsustainable. As long as people need it, they’ll find a way. Global trends are moving toward regulation, not prohibition. The U.S., EU, Japan, and even India are creating licensing systems for crypto exchanges. Nepal is alone in holding firm. Pressure is building. Nepali diaspora communities abroad are speaking out. International financial institutions are warning that the ban drives activity into unregulated zones, increasing money laundering risks-not reducing them. But for now, the government shows no sign of backing down. The 2025 arrests proved they’re willing to go after even large-scale operations. They’re not just chasing small traders. They’re trying to dismantle the entire network. For the average Nepali, the choice is simple: risk arrest, or stay out of the system entirely. Most choose risk. Because when your family depends on a transfer, and the banks won’t help, crypto isn’t a luxury. It’s a lifeline.

What This Means for You

If you’re in Nepal and thinking about crypto:

• There is no legal protection. If you get caught, you’re on your own.
• There is no insurance. If a trader disappears with your money, the police won’t help you recover it.
• There is no recourse. No customer service. No dispute system. No refunds.

The only advice from those who’ve been through it: Don’t use your real name. Don’t link your bank account. Don’t talk about it. And never, ever keep large amounts in one wallet. It’s not about getting rich. It’s about staying free.

Why This Isn’t Just About Crypto

This isn’t a story about Bitcoin. It’s about control. Nepal’s government wants to keep all money flowing through its system. It wants to know where every rupee goes. It wants to tax it, track it, and regulate it. But crypto doesn’t care about borders. Or banks. Or laws. And for millions of Nepalis, that’s the point. The underground market isn’t a flaw in the system. It’s a response to it. Until the system changes, the trading won’t stop.

What’s Next?

The NRB has said it’s “reviewing” its policy. But don’t expect legalization anytime soon. No official talks, no public consultations, no draft bills. For now, the underground thrives. And the people? They keep trading.