Cryptocurrency Investment In Nepal: A Beginner's Guide

Cryptocurrency is a digital currency that exists as computer data and is independent of traditional economic structures. While it is growing in popularity worldwide, Bitcoin and other cryptocurrencies have been deemed illegal in Nepal by the Nepal Rastra Bank. Despite this, some platforms like Paxful, Coinbase, and Binance allow users in Nepal to buy, sell, and hold cryptocurrencies. This paragraph introduces the topic of investing in cryptocurrency in Nepal, highlighting its legal status and the platforms available for trading.

Cryptocurrency in Nepal: legal status

Cryptocurrency in Nepal has had a somewhat turbulent history, with the country's central bank, the Nepal Rastra Bank, issuing a notice in 2017 declaring that "all transactions related to or regarding bitcoins are illegal". This was followed by the first arrests of individuals allegedly running bitcoin exchange businesses in the country. The Foreign Exchange (Regulation) Act 2019, which sets limitations on the transactions of Nepalese citizens for receiving and sending money or other incentives, has been cited as the governing Act upon which the ban on cryptocurrency has been introduced.

Despite this, several crypto exchange platforms, including Paxful, Coinbase, Binance, CEX.IO, Coinmama, Kraken, LocalBitcoins, OKCoin, Changelly, and Bittrex, are available in Nepal. These platforms allow users to buy, sell, and hold cryptocurrencies, such as Bitcoin, with some accepting various payment methods, including credit/debit cards, bank transfers, Esewa, PayPal, Skrill, and Tether (USDT).

However, it is important to note that the legal framework surrounding cryptocurrencies in Nepal remains restrictive and discouraging. The Nepalese government has not established the necessary provisions for the legalization of cryptocurrencies, and transactions involving them are prohibited. Engaging in such transactions is considered illegal and can result in severe penalties.

Therefore, while it is possible to access and use crypto exchange platforms in Nepal, the legal status of cryptocurrencies remains unclear and subject to regulatory changes. Individuals considering investing in or using cryptocurrencies in Nepal should carefully consider the associated risks and stay updated with the country's evolving legal framework.

Choosing a crypto exchange

When choosing a crypto exchange in Nepal, there are several factors to consider. Firstly, it is important to select a platform that is available and compliant in the country. Several popular exchanges, such as Binance, Cex.io, Coinmama, Kraken, Paxful, LocalBitcoins, OKCoin, Changelly, and Bittrex, are available in Nepal and can be used to buy and sell Bitcoin. Each of these exchanges offers unique features, payment methods, and levels of security, so it is essential to research and choose the one that best aligns with your needs.

For instance, if you are new to crypto and prefer a user-friendly interface, you might opt for an exchange like Coinbase, which is the most trusted crypto platform in Nepal and offers easy, safe, and secure crypto conversions. On the other hand, if you value low fees and a wide range of payment options, you might consider Paxful, which allows you to buy Bitcoin with Esewa, gift cards, or any payment method enabled on their platform. They also offer competitive Nepalese Rupee to Bitcoin exchange rates.

Another critical factor to consider is security. Crypto exchanges should employ robust security measures to protect your funds and personal information. Features like two-factor authentication, encryption, and cold storage of assets can help ensure the safety of your crypto holdings. Additionally, it is worth checking if the exchange provides insurance coverage for assets stored on their servers in case of any breaches or losses.

It is also beneficial to examine the range of cryptocurrencies offered by the exchange. While Bitcoin is the most popular, there are numerous other cryptocurrencies, such as Ethereum, Litecoin, and Tether, that you might want to invest in. Choosing an exchange that supports multiple cryptocurrencies will provide you with more flexibility and opportunities to diversify your portfolio.

Lastly, consider the liquidity and trading volume of the exchange. Higher liquidity and trading volume can result in tighter spreads and lower slippage, making it easier to enter and exit positions without significantly impacting the market price. This is particularly important if you plan on making frequent trades or investing large amounts.

Payment methods

When it comes to payment methods for buying cryptocurrency in Nepal, there are several options available. The specific methods will depend on the platform or exchange you choose, as each has its own supported payment options. Here are some of the commonly used payment methods:

• Credit and Debit Cards: Many exchanges in Nepal, such as Coinmama, Binance, and Kraken, accept credit and debit cards as a payment method. This option is usually quick and convenient, but it may come with higher fees compared to other methods.
• Bank Transfers: Bank transfers are also widely accepted by exchanges like Paxful, Binance, and Kraken. This method typically involves transferring funds from your bank account to the exchange's account. It can take a few minutes to several days for the funds to be credited to your exchange account, depending on the bank and the exchange's processing times.
• Online Wallets: Some platforms, like Paxful, offer the option to use online wallets for purchasing cryptocurrencies. These wallets can be funded using various methods, such as bank transfers or credit cards, and then used to buy cryptocurrencies on the platform.
• PayPal: PayPal is another popular payment method supported by certain exchanges or platforms, such as Paxful. It provides a convenient way to purchase cryptocurrencies, but it's important to note that not all exchanges accept PayPal.
• Other Payment Methods: In addition to the above, there are other payment methods available depending on the platform. For example, platforms like Paxful may support gift cards, Skrill, or Tether (USDT). It's always a good idea to check the supported payment methods for the specific platform or exchange you plan to use.

It's worth noting that the availability of certain payment methods may vary between exchanges, and it's recommended to review the fees, processing times, and any other relevant information before making a decision. Additionally, some methods, like bank transfers, may have different requirements or limits depending on the specific bank and exchange involved.

Security and wallets

Security is a key consideration when investing in cryptocurrency. Crypto wallets are an essential tool for buying, trading, and selling cryptocurrencies. They are used to store crypto securely, as well as to protect and validate transaction information.

There are two main types of crypto wallets: hot wallets and cold wallets. Hot wallets are connected to the internet and are often available as a standalone product or as an add-on through popular crypto exchanges. Cold wallets, on the other hand, are not connected to the internet and are usually in the form of a USB drive or paper wallet.

Hot wallets make it easy to execute crypto transactions but are more vulnerable to hackers. Examples of hot wallets include Coinbase Wallet, MetaMask, TrustWallet, and Exodus. On the other hand, cold wallets provide better security for long-term storage but are less convenient to access. Examples of cold wallets include Ledger, Ellipal Titan, and SafePal.

It is important to note that crypto exchanges themselves can be targets for cybercriminals. For instance, Coinbase, a popular exchange, stated in its quarterly report that in the event of bankruptcy, customers' crypto assets could be subject to bankruptcy proceedings. Therefore, it is crucial to consider the security features offered by different crypto wallets and exchanges before making an investment decision.

Anonymity and privacy

Cryptocurrency is a digital or virtual currency that uses cryptography for security and operates independently of a central bank. It is decentralized, meaning it is not controlled by a central authority like a government or bank, and instead relies on a distributed network of computers. This structure allows for increased privacy and anonymity for users, as transactions are not linked to personal information or identities.

In Nepal, the use of cryptocurrency has not been legalised and is met with strict regulatory approaches. The Nepal Rastra Bank (NRB), the country's central bank, has consistently maintained a stance against the trading, mining, and use of cryptocurrencies within the nation. This prohibition includes activities such as trading in Bitcoin or other digital currencies, operating cryptocurrency exchanges, and facilitating cryptocurrency transactions. The NRB has cited concerns about financial crimes, lack of regulatory oversight, and risks to the country's financial stability as reasons for the ban.

Despite the government's stance, there is a growing interest in cryptocurrencies among Nepalese citizens. However, due to the legal restrictions, individuals engaging in cryptocurrency activities face the risk of legal repercussions. One of the primary concerns surrounding the use of cryptocurrency in Nepal is the potential for illegal activities, such as money laundering and the financing of terrorism, due to the anonymity and privacy that cryptocurrencies provide.

While cryptocurrencies offer enhanced privacy compared to traditional platforms, advancements in blockchain analytics tools have threatened the anonymity of users. It is important for individuals in Nepal to be aware of the legal risks associated with cryptocurrency investments and transactions, as the government has warned of prosecution for anyone found dabbling in virtual currencies.

To maintain anonymity and privacy when investing in cryptocurrency in Nepal, individuals may consider using privacy-focused cryptocurrencies like Monero, Zcash, and Dash, which prioritize user privacy by obfuscating transaction details. Additionally, utilising secure platforms that offer strong encryption and two-factor authentication can help protect personal information. However, it is essential to stay informed about the legal status and any updates regarding cryptocurrency regulations in Nepal.

Frequently asked questions