3 Years Imprisonment for Large Crypto Transactions in Nepal: What You Need to Know

If you send or receive more than 10 million Nepalese Rupees (NPR) in cryptocurrency in Nepal, you could face three years in prison. It doesn’t matter if you’re trading, mining, or just helping a family member abroad send money. The law doesn’t care about your intent. It only sees the number on the blockchain.

How the Law Works

The ban isn’t new. Nepal Rastra Bank (NRB) first warned against cryptocurrency in 2017. But it wasn’t until the Foreign Exchange (Regulation) Act, 1962, was enforced with teeth that things got serious. Section 12 of that law says any unauthorized foreign exchange transaction over 10 million NPR - roughly $74,000 USD - triggers mandatory imprisonment for up to three years. That’s not a fine. That’s jail time.

On top of that, the government can seize everything tied to the transaction: your laptop, phone, crypto wallet, even bank accounts. Fines can be up to three times the amount involved. And if you can’t pay? You go back to jail - for up to four more years.

It’s not just one law either. Police can charge you under multiple statutes at once: the Nepal Rastra Bank Act, the National Penal Code, and the Electronic Transaction Act. One person might get hit with three different charges for the same transaction. That’s not legal clarity. That’s legal chaos.

Who Gets Caught?

You might think only big traders get targeted. But that’s not true.

In 2023, the Central Investigation Bureau (CIB) arrested 17 people for sending $5,000 to $10,000 in Bitcoin to relatives overseas. That’s less than half the legal threshold. Yet they were charged anyway. Why? Because the law doesn’t have a minimum for enforcement - only a maximum. Police are under pressure to show results, so they go after anyone they can.

One man from Kathmandu, reported on Reddit, saw his father jailed for two years after receiving 5.2 million NPR in crypto - under the 10 million NPR limit. The judge called it an “aggravating circumstance.” No explanation. No precedent. Just a prison sentence.

Even small remittances - the kind families rely on to pay for medicine or school fees - are being treated like organized crime. Chainalysis estimates 210,000 Nepalis used crypto in 2022. Most weren’t speculators. They were people trying to avoid NRB’s 1% fee on traditional remittances. Now, they’re facing pretrial detention, asset seizures, and court dates they can’t afford.

How Enforcement Works

When police suspect crypto activity, they don’t wait for a warrant. They show up, seize devices, and start digging. Forensic tools like Cellebrite UFED are used to extract wallet keys from phones and laptops. In one 2023 case, police confiscated a man’s laptop with 2.3 BTC (worth $78,000 at the time) for a $5,000 transaction. He spent 18 months in jail before trial, even though the transaction was below the legal threshold.

The problem? Blockchain values swing wildly. In the Kalopul case, police used the Bitcoin price at the time of seizure ($38,500) instead of the price when the transaction happened ($41,200). That dropped the value below 10 million NPR - but they still prosecuted. The law doesn’t say how to value crypto. So police pick the number that gets them the most jail time.

And there’s no training. Most officers don’t understand blockchain. Prosecutors don’t know how to interpret wallet addresses. Defense lawyers rarely specialize in crypto. According to Onesphere Law Associates, 78% of defendants have no legal help with digital forensics. That means people plead guilty just to get out of detention.

Why Nepal Took This Path

NRB says the ban is about protecting the economy. They claim crypto caused $20.8 million in unauthorized forex outflows in 2021. They point to 1,247 fraud cases totaling $31.8 million in 2022. But the numbers don’t add up.

Nepal receives over $2 billion in remittances every year - 23% of its entire GDP. Only 5.7% of that - about $119 million - went through crypto. That’s less than 1% of total remittances. Yet the punishment for crypto is far harsher than for any other form of money movement.

Compare that to India. They tax crypto at 30% but let people trade freely. China banned exchanges but doesn’t jail individuals for holding Bitcoin. Thailand and Singapore have licensed platforms. Nepal is one of only 12 countries in the world that criminalizes crypto use with prison time.

The real motive? Control. NRB wants to keep all foreign exchange flowing through its system. Crypto bypasses their fees, their monitoring, their power. So they made it a crime.

What’s Being Done About It?

There’s growing pushback. Legal experts say the law is unconstitutional. Dr. Prakash Kafle, a professor at Tribhuvan University, calls it “disproportionate punishment - treating crypto like narcotics.” Senior advocate Ramesh Dahal argues it violates Article 26 of Nepal’s Constitution, which protects economic freedom.

The Supreme Court is currently reviewing a constitutional challenge (Writ No. 0804/080). A ruling is expected by late 2024. Meanwhile, some judges are starting to apply “proportionality” - reducing sentences for small transactions. But enforcement hasn’t stopped.

In March 2024, CIB arrested nine people for $85,000 in crypto transfers - all charged under the 10 million NPR rule, even though most transactions were below that. NRB Governor Maha Prasad Adhikari said in a February 2024 interview: “The three-year imprisonment provision will remain until we establish foolproof monitoring.”

Meanwhile, the International Monetary Fund called the policy “economically counterproductive.” The World Bank noted it pushes remittances further underground. And the Nepal Bar Association called it “legal schizophrenia” - prosecuting the same act under five different laws.

What This Means for You

If you’re in Nepal and using crypto - even for $100 - you’re at risk. Police don’t need proof of fraud. They don’t need to show you broke the law. They just need to find a wallet on your phone and a transaction over a certain amount. That’s enough.

If you’re sending money to Nepal, don’t use crypto. Use licensed services like Western Union or MoneyGram. Even if it costs more, it’s safer. There’s no appeal if you’re arrested.

If you’re a Nepali abroad and receive crypto from home, understand the risk. That money could be traced. Your family could be jailed. No one is immune.

And if you’re a business? Forget crypto payments. Nepal’s banking system won’t touch it. Any company accepting crypto is signing up for legal trouble.

Is There Any Hope for Change?

Maybe. The 2023-24 budget kept the ban. But pressure is building. The Nepal Bankers’ Association supports the law - but 92% of financial professionals surveyed in 2023 said they’d support a regulated system, not a ban. Many believe Nepal will follow India’s path: tax crypto, license exchanges, and stop jail time.

But until then? The law stays. The arrests continue. And the fear lingers.

There’s no gray area. No loopholes. No exceptions. If you move crypto in Nepal, you’re playing with fire. And the punishment isn’t just financial. It’s personal. It’s your freedom.