Foreign Exchange Act and Crypto Restrictions in Bangladesh: The Legal Reality

You can download Binance on your phone right now. You can find a local agent willing to swap Taka for Bitcoin. But if you are caught doing it in Bangladesh is a South Asian nation with strict financial controls managed by the central bank, you might be breaking the law. Or maybe not. That is the confusing reality of cryptocurrency in the country today.

The government says crypto is banned. The banks say don't touch it. Yet millions of people still trade digital assets. Why? Because the law is old, vague, and technically difficult to enforce against something like Bitcoin. If you are trying to navigate this gray area, you need to understand exactly what the Foreign Exchange Regulations Act (FERA) is the primary legislation governing currency transactions in Bangladesh since 1947 actually says-and what it fails to say.

The Core Conflict: FERA vs. Digital Assets

The backbone of Bangladesh's financial control is the Foreign Exchange Regulations Act of 1947 is a colonial-era law designed to manage currency reserves and prevent capital flight. It was written long before computers existed, let alone blockchain technology. Its main job is to define what counts as "currency" so the state can control how it moves in and out of the country.

Under Section 2(b) of FERA, "currency" is defined in two ways:

• Physical or paper instruments like notes, checks, drafts, and traveler’s cheques.
• Any other instrument that the Bangladesh Bank is the central banking authority responsible for monetary policy and currency regulation officially declares as currency via a gazette notification.

Here is the catch. Bitcoin does not fit into category one. It is not a check or a note. More importantly, the Bangladesh Bank has never issued the specific legal notification required under category two to declare Bitcoin or Ethereum as "currency." Without that official declaration, legal experts argue that cryptocurrencies do not technically fall under the definition of foreign exchange controlled by FERA.

This creates a massive loophole. The government treats crypto like illegal foreign currency, but the statute doesn't explicitly name it. This ambiguity makes criminal prosecution under FERA legally shaky. You aren't just dealing with a ban; you are dealing with a debate over whether the ban has a solid statutory foundation.

Bangladesh Bank’s Hardline Stance

Even if the law is fuzzy, the regulator is not. Since 2017, the Bangladesh Bank is the central banking authority responsible for monetary policy and currency regulation has maintained a strict prohibition. They have sent circulars to commercial banks ordering them to block any transaction linked to cryptocurrency exchanges.

Their reasoning is straightforward: risk. They fear money laundering, terrorism financing, and capital flight. In a developing economy where keeping money inside the formal banking system is crucial for stability, untraceable digital assets are seen as a threat. The bank views crypto not as an investment tool, but as a channel for illicit flows.

This means your bank account is the first line of defense against you. If you try to wire funds to a known exchange like Coinbase or Kraken, the transaction will likely be frozen or reversed. The bank monitors large outbound transfers closely. However, this restriction applies to the *banking* layer, not necessarily the *possession* layer, which leads to the underground market thriving.

The Underground Market: How People Actually Trade

Despite the ban, the demand for crypto in Bangladesh is real. So, how do people get around the restrictions? They use peer-to-peer (P2P) networks and local agents.

You won't see many direct bank transfers to exchanges. Instead, you will find individuals acting as informal brokers. These agents hold crypto wallets and accept Bangladeshi Taka via mobile financial services (like bKash or Nagad) or cash. They then transfer the equivalent amount of Bitcoin or USDT to your wallet. For the agent, it looks like a personal transfer. For you, it’s a purchase. There is no official record of a "crypto trade" happening in the banking system, only a series of personal payments.

Apps like Binance and KuCoin remain accessible on the Google Play Store and Apple App Store. The government hasn't blocked the apps themselves because blocking internet traffic is technically difficult and politically sensitive. Instead, they rely on banks to cut off the fiat on-ramp. This forces traders into the shadows, using P2P desks that operate with plausible deniability.

Taxation: A Paradoxical Framework

Here is where things get even stranger. While trading crypto might be restricted, paying taxes on it is expected. The National Board of Revenue (NBR) is the primary tax enforcement authority in Bangladesh handling income and corporate taxes handles crypto gains under general tax laws.

As of 2025, there is no specific "Crypto Tax Act." Instead, the NBR treats cryptocurrencies as property. If you sell Bitcoin for a profit, that gain is considered taxable income under the Income Tax Ordinance of 1984 is the primary legislation governing taxation of income in Bangladesh. You could theoretically be liable for capital gains tax.

This creates a paradox. The state prohibits the activity but claims a right to tax the profits. In practice, few people report these gains voluntarily because admitting to holding crypto could invite scrutiny from the Bangladesh Bank. However, if you are audited for other reasons, undeclared crypto assets could become a significant liability. The lack of clear guidance means taxpayers are left guessing about compliance rates and reporting thresholds.

Regional Comparison: Is Bangladesh Falling Behind?

To understand the impact of these restrictions, look at the neighbors. Bangladesh is an outlier in South Asia.

India has embraced a structured approach, taxing profits heavily but allowing the market to exist. This generated $1.8 billion in tax revenue in the last fiscal year. Pakistan, after years of bans, finally established the Pakistan Digital Assets Authority in May 2025 to regulate exchanges and even allocated electricity for mining. Bangladesh, meanwhile, remains stuck in prohibition mode. This isolation limits its ability to attract fintech investment and risks pushing more economic activity into the unmonitored shadow economy.

Future Outlook: Reform or Crackdown?

The current situation is unsustainable. The underground market continues to grow, evidenced by the ease of finding P2P agents. Academic voices, such as Dr. B M Mainul Hossain from Dhaka University, argue that banning crypto is ineffective. Regulation, they suggest, would bring transparency and tax revenue.

The NBR is reportedly considering updates to provide clearer guidelines on crypto taxation. This suggests a shift toward recognition rather than pure denial. However, until the Bangladesh Bank amends FERA or issues a new directive that clearly defines digital assets, the legal risk remains high for users.

If you are operating in this space, assume the following:

• Your bank can freeze accounts if they suspect crypto links.
• Tax authorities can claim back-taxes on undisclosed gains.
• Legal protection is minimal because the statutes are outdated.

The gap between the 1947 law and 2026 technology is widening. Until legislators close that gap, traders must rely on caution and informal networks.