Banks Block Crypto Exchanges: Cryptocurrency Regulation in Bangladesh and South Asia

The Bank That Says No — Repeatedly

In September 2025, Bangladesh Bank issued Warning Notice No. BB/CC/2025/17 — threatening license revocation and criminal prosecution for any entity facilitating cryptocurrency transactions. It was not the first such warning. Bangladesh Bank issued its first statement against Bitcoin in 2014. It declared crypto illegal in 2017 under Section 33 of the Foreign Exchange Regulation Act. It reaffirmed the ban through the 2022 FX regulations. In October 2025, Governor Dr. Ahsan H. Mansur stated publicly: "Cryptocurrency has no place in Bangladesh's remittance ecosystem for the foreseeable future." Deputy Governor Ahmed Munas had put it more bluntly the previous month: "Cryptocurrencies pose unacceptable risks to monetary sovereignty."

And yet: Chainalysis ranks Bangladesh 13th in the world for crypto usage in 2025. TRM Labs places it 14th. Approximately 3.1 to 4.3 million Bangladeshis are estimated to own crypto wallets. Binance reported over 600,000 Bangladeshi users in 2024. South Asia as a whole — including Bangladesh — was the fastest-growing region for crypto adoption in the first half of 2025, recording an 80 percent increase from the same period in 2024 and reaching approximately $300 billion in transaction volume. Bangladesh is one of the most comprehensively banned crypto markets in the world, and simultaneously one of the most actively adopted. This contradiction sits at the center of the country's digital finance situation — and it is not going away.

What the Ban Actually Covers

Bangladesh's legal position on cryptocurrency is frequently described as a ban, but the reality is more precisely described as a regulatory gray area with severe enforcement risk. No specific law in Bangladesh explicitly criminalizes the ownership of cryptocurrency. What exists is a web of warnings and enforcement actions under existing legislation: the Foreign Exchange Regulation Act, the Money Laundering Prevention Act, and the Bangladesh Bank Order. Holding crypto in a foreign wallet may not itself be a crime. Converting it into taka, receiving it via a domestic bank transfer, or using it in a local transaction clearly is — or at least triggers the risk of prosecution under AML statutes.

The practical consequence is that Bangladesh has created a prohibitionist framework without prohibition legislation. No licensed exchange operates in the country. No regulatory sandbox covers crypto businesses. The National Board of Revenue has not issued a specific framework for taxing crypto transactions, applying the general Income Tax Ordinance of 1984 instead — which means crypto gains are technically taxable under existing law but there is no guidance on how to report them without potentially self-incriminating under AML enforcement. The Bangladesh Financial Intelligence Unit (BFIU) and the Criminal Investigation Department (CID) are the enforcement bodies, but enforcement has been episodic rather than systematic.

One documented case involved a businessman accused of running a fake crypto company that defrauded investors of over $1.5 million. Another involved an arrest for processing international Bitcoin transactions linked to hackers. The MTFE Ponzi scheme — a cryptocurrency fraud that victimized thousands of Bangladeshis — became one of the most cited examples by Bangladesh Bank officials for why the ban is justified. These are genuine concerns. They are also cases involving fraud and criminal networks, not retail crypto investors using Binance to hold USDT as a dollar hedge.

Why People Are Using It Anyway

Understanding why 3 to 4 million Bangladeshis are using cryptocurrency despite the ban requires understanding what problems it solves that the formal financial system does not. Three dynamics are driving adoption.

The first is remittances. Bangladesh received a record $30 billion in remittances in fiscal year 2024-25 — more than the country's entire garment export sector. The formal channels have improved substantially: 87 percent of remittances now flow through digital channels including bKash and Nagad, up from 62 percent two years earlier. The Bangladesh Bank's "Remittance Direct" app, launched in August 2025, charges fees as low as 3.8 percent. But the World Bank estimates average fees at 6.5 percent — well above the 3 percent global target. For a worker sending $500 from Malaysia, that is $32.50 in fees. Some report losing $300 in fees on $500 transfers. Peer-to-peer crypto networks, especially stablecoins like USDT, offer faster and cheaper alternatives — and for workers in countries where formal remittance infrastructure is thin, they may be the only practical option.

The second is foreign exchange access. Bangladesh's foreign reserves fell from $45 billion in 2021 to approximately $26 billion by mid-2025. Currency controls, inflation, and limited access to dollar-denominated savings have made stablecoins like USDT and USDC attractive as an unofficial hard currency hedge. With the taka under sustained depreciation pressure, holding digital dollars through a Binance account funded via bKash is not irrational financial behavior for someone trying to preserve savings. It is precisely the kind of capital flight that Bangladesh Bank is trying to prevent — and also precisely the kind of demand that a ban without accessible alternatives only pushes underground rather than eliminates.

The third is the freelance economy. Bangladesh has a significant and growing freelance workforce earning foreign currency through platforms like Upwork and Fiverr. Payouts through traditional banking channels are slow, expensive, and involve bureaucratic compliance requirements for individuals. Stablecoins provide near-instant international settlement. The ICT Division acknowledged this reality in its 2020 National Blockchain Strategy, which embraced blockchain technology for government use while keeping crypto itself banned — a distinction that has created what multiple observers have called a "dual reality": officially prohibited, unofficially necessary.

South Asia's Diverging Regulatory Map

Bangladesh's position makes more sense — and looks more precarious — when compared to how its neighbors are approaching the same challenge. India offers the most instructive contrast. The Reserve Bank of India banned banks from dealing with crypto entities in 2018, but the Supreme Court overturned that ban in 2020. India now imposes a 30 percent tax on crypto earnings and a 1 percent tax deducted at source on transactions above specified thresholds. Crypto is not legal tender, but it is taxed and traded openly. India ranks first globally in crypto adoption according to TRM Labs' 2025 data, with a large middle class, a thriving developer ecosystem, and growing institutional interest.

Pakistan's trajectory is more dramatic. Pakistan's crypto adoption ranks third globally in TRM Labs' 2025 index. In March 2025, the government established the Pakistan Crypto Council and announced plans for a dedicated Pakistan Virtual Assets Regulatory Authority (PVARA). The contrast with Bangladesh is stark: two countries with similarly large populations, similar remittance dependence, similar income levels, and similar historical caution about financial innovation — but one moving toward regulated adoption and one doubling down on prohibition.

Sri Lanka bans crypto but is exploring CBDC development. Nepal bans crypto outright. The region's picture is fragmented. What it suggests is that South Asia does not have a unified approach to digital assets — and that the countries choosing regulated frameworks are positioning themselves to capture economic activity that prohibition is simply redirecting underground or to neighboring jurisdictions.

The CBDC Question: Bangladesh Bank's Alternative

Bangladesh Bank's response to the demand for digital currency is not nothing — it is a Central Bank Digital Currency. The bank began feasibility studies in 2022 and launched an early pilot in 2024. As of early 2026, no further developments have been publicly confirmed. The CBDC initiative is framed as a state-controlled digital taka that would modernize payments, support financial inclusion, and integrate with India's UPI cross-border payment system — all without the decentralization, anonymity, or capital mobility that make cryptocurrency politically threatening to Bangladesh Bank's monetary sovereignty objectives.

The logic is coherent from a central bank perspective. A CBDC preserves state control over money supply and transactions. It can be designed to support KYC and AML compliance by default. It can extend digital payment access to the unbanked without creating the regulatory blind spots that decentralized crypto creates. Bangladesh Bank Governor Mansur's framing — that crypto has no place in the remittance ecosystem "for the foreseeable future" while the bank pursues its own digital currency — suggests this is a sequencing argument, not a permanent ideological position.

The risk is timing. While Bangladesh develops a CBDC that has not launched at scale, 3 to 4 million Bangladeshis are already building financial habits and networks around Binance, USDT, and P2P crypto channels. The underground market is not waiting for regulatory clarity — it is growing precisely because regulatory clarity is absent. Professor B.M. Mainul Hossain of Dhaka University captured the frustration: "Sitting back and doing nothing is not the answer." BASIS's Syed Kabir has noted that blockchain technology is coming to Bangladesh regardless. The question is whether Bangladesh will be shaping the rules or operating outside the ones written elsewhere.

The Cost of Prohibition Without Alternative

The case Bangladesh Bank makes for its ban — money laundering, terrorism financing, taka destabilization, consumer protection from fraud — is not fabricated. The MTFE Ponzi scheme cost Bangladeshis real money. P2P markets without regulatory oversight do expose users to scams and price manipulation. Foreign exchange controls exist because Bangladesh's reserve position is genuinely fragile and uncontrolled capital flows could cause macroeconomic damage.

What the ban does not do is eliminate crypto use. It eliminates licensed, regulated, consumer-protected, tax-reported crypto use. The 3 to 4 million Bangladeshis using Binance via VPN and bKash have no recourse if they are defrauded. They cannot file a tax return that accurately reflects their crypto income without potentially triggering an AML investigation. They cannot build businesses in the blockchain space in Bangladesh without operating illegally. The blockchain developers and fintech entrepreneurs who would create regulated infrastructure — and jobs, and tax revenue — are operating from more permissive jurisdictions or not operating at all.

Global pressure is building. The IMF and World Bank have consistently urged Bangladesh and similar countries toward regulatory frameworks rather than blanket bans. The FATF — the global AML standard-setter — recommends regulating and monitoring virtual asset service providers, not banning them, precisely because prohibition moves activity off the grid and makes it harder to trace. As Pakistan and India develop their frameworks and attract the talent and capital that comes with regulatory clarity, Bangladesh's prohibition is becoming less a position of strength and more a position of escalating cost.

win-tk.org is a wintk publication covering global affairs and culture for Bangladeshi and South Asian audiences.