The International Monetary Fund has flagged the growing adoption of cryptocurrencies in Nepal despite a legal ban and urged authorities to closely monitor the sector to safeguard financial stability and prevent illicit financial flows.

“Flows of stablecoins and unbacked crypto assets grew markedly between 2019 and 2024, although adoption remains modest relative to peers, despite legal prohibition on crypto transactions,” the IMF said in a report released on Tuesday.

The IMF said a clear and well-sequenced regulatory framework aligned with international standards would help safeguard financial stability, financial integrity and consumer protection, while limiting the circumvention of capital controls and large-scale deposit…