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  /  cryptocurrency   /  Is Nepal’s Crackdown on its Crypto Industry Influenced by China?

Is Nepal’s Crackdown on its Crypto Industry Influenced by China?

Nepal is set to ban all crypto activities, maybe with China’s blessings!

It is an instance of one of the smallest countries in the world that are daringly confronting the mega cryptocurrency market. Very recently the Nepal government has reiterated its hard stance on the crypto industry. The Central Bank of Nepal, the Nepal Rastra Bank, and the Nepal Telecommunications Authority, the regulatory agency of the telecommunications sector, have come up with a notice that all cryptocurrencies are illegal, and crypto activities are therefore punishable under law. It has in the process specifically named, Bitcoin, and online gambling. A warning has been issued that “stern action” would be taken against the law violators and behind this warning, there is also an expressed concern that crypto activities are on the rise in Nepal. The act has sparked off a discussion— whether it is a result of Nepal’s own decision or is it an outcome of the ‘China factor’. If so, where does China come in?

Only a year back China had unleashed a crackdown on the cryptocurrency market when its central bank, the People’s Bank of China, urged banks and payment firms to enforce what it described as a “hard crackdown” on cryptocurrency trading including Bitcoin. However, it was not the first move by China in this arena. The Chinese authorities have been consistently trying to prevent the proliferation of digital coins for a fairly long time. Following its own statement, the Central Bank of the country met representatives of various banks and payments firms in China and urged them to meticulously check client accounts and to cut off payment channels of those found guilty of involvement in cryptocurrency transactions including that Bitcoin. Though China has not targeted the holders of digital coins as yet, another hard move steps have been taken to make the ban on offshore crypto exchanges more effective. The last one makes it impossible for mainland Chinese traders to acquire cryptocurrencies by way of offshore trading.

Does this ‘China model’ influence Nepal in making a strident move against crypto activities? There may not be any specific document that mentions that Nepal’s act is a direct fallout of China’s actions. But there are reasons to trace the threads between the two neighbors, especially in the context of the recent instances of Nepal ‘coming closer to China. In the last few years, there has been an evident rise in the Chinese financial aid and assistance to Nepal in both material and human resource terms. China has been the largest source of FDI to Nepal from 2015 onwards, and the third-largest source of remittance to Nepal. Information also reveals that the Chinese investors have made a commitment of 23.37 billion Nepali rupees (US$195.74 million) as foreign direct investment in Nepal during the first six months of the 2021-22 fiscal year that started in mid-July, 2021. With India being relegated to the background for reasons that are too many to be discussed here, there are observers who go to the extent of arguing that Nepal’s economy is now being steadily influenced, if not ‘dictated’ by China. Whatever may be the case, an inference that Nepal’s hostility to crypto activities may have something to do with China’s newfound aggression of the same kind may hold water.

With China identifying the cryptocurrency market as an impediment to its advancing economy it is quite possible that China is ‘advising’ Nepal on this count or Nepal has taken lessons on her own on crypto activities from the Chinese example.