Foreign Exchange Act and Crypto Restrictions in Bangladesh: Legal Gaps Explained

Imagine trying to buy a digital asset in a country where the law says you can’t hold it, yet the app store lets you download the trading platform without a hitch. That is the daily reality for many people interested in cryptocurrency in Bangladesh. The situation here isn't just about strict rules; it’s a messy mix of old laws, central bank warnings, and legal loopholes that leave everyone guessing what is actually enforceable.

If you are looking at the financial landscape in Dhaka or anywhere else in the country, you need to understand that while the government claims a total ban exists, the legal foundation for that ban is surprisingly shaky. This article breaks down exactly how the Foreign Exchange Regulations Act of 1947 (FERA) interacts with modern digital assets, why experts say the ban might not hold up in court, and what this means for your money.

The Core Conflict: Old Laws vs. New Tech

To understand why cryptocurrencies face such heavy restrictions, we have to look at the legislation governing foreign exchange. The primary tool used by authorities is the Foreign Exchange Regulations Act of 1947 (FERA). This law was written decades ago, long before Bitcoin existed, to control traditional currency flows in a post-independence economy. It defines "currency" very specifically under Section 2(b).

According to FERA, currency includes:

• Currency notes, postal orders, cheques, drafts, travelers' cheques, letters of credit, bills of exchange, and promissory notes.
• Any other instrument that the Bangladesh Bank declares as currency via an official notification in the Gazette.

Here is the catch. Bitcoin, Ethereum, and other tokens do not fit into the first category. They are not paper notes or checks. More importantly, the second category requires a specific legal action: the Bangladesh Bank must officially declare these digital assets as "currency" through a statutory notification. As of now, no such notification has been issued. This creates a massive legal gap. Without that declaration, arguing that holding Bitcoin violates FERA is legally questionable because the statute simply doesn't define it as prohibited foreign exchange.

Bangladesh Bank’s Stance and Practical Bans

Despite the legal ambiguity in the text of the law, the Bangladesh Bank, which serves as the central banking authority, has taken a hardline approach. Since 2017, the central bank has issued multiple circulars warning citizens against using, trading, or possessing cryptocurrencies. Their stated reasons include preventing money laundering, stopping terrorism financing, and protecting the stability of the national financial system.

In practice, this prohibition works through pressure on commercial banks rather than direct police raids on individuals. Banks are instructed to block transactions linked to known cryptocurrency exchanges. If you try to send Taka to a wallet address or an exchange like Binance using your local bank account, the transaction will likely be flagged and reversed. The central bank views any attempt to move funds out of the formal banking system into unregulated digital markets as a threat to monetary control.

This practical ban extends beyond just trading. Possession itself is discouraged, though enforcement varies. The goal is to keep all financial activity within the supervised banking sector, where the government can monitor flows and enforce anti-money laundering (AML) standards.

The Underground Market and How People Trade Anyway

Laws on paper often differ from reality on the ground. In Bangladesh, a thriving underground market for digital assets continues to operate despite the official prohibitions. You can still find major applications like Binance and KuCoin listed on the Google Play Store. While some features may be restricted or accounts frozen if linked to local bank cards, the technology remains accessible.

So, how do people actually buy crypto? They use informal networks. Local agents act as intermediaries, facilitating peer-to-peer (P2P) trades. An individual wants to buy Bitcoin; they transfer Bangladeshi Taka to a local agent’s bank account or mobile wallet. The agent then transfers the equivalent value in cryptocurrency to the buyer’s digital wallet. These agents charge a small commission for taking on the risk. This method bypasses the direct link between the user and the international exchange, making it harder for banks to flag the initial Taka transfer as crypto-related.

However, this comes with significant risks. There is no consumer protection. If an agent disappears with your money, or if the government cracks down on these networks, users have little recourse. The National Board of Revenue (NBR) also monitors large cash movements, so relying on informal channels carries both legal and security dangers.

Taxation: A Paradoxical Framework

One of the most confusing aspects of the current regime is taxation. The National Board of Revenue (NBR), which handles tax collection, operates under the Income Tax Ordinance of 1984. Currently, there is no specific law defining how to tax cryptocurrency profits. However, the general rule treats cryptocurrencies as property.

This creates a strange paradox. The central bank says you cannot trade crypto, but the tax authority implies that if you do make a profit from selling it, that gain is taxable income. Gains from the sale of digital assets could be subject to capital gains tax under general provisions. This lack of specific legislation leaves a regulatory gray area. Traders are unsure whether they should report their income, fearing that doing so admits to participating in an illegal activity, while ignoring it risks penalties for tax evasion later.

Experts suggest that the government is considering updates to provide clearer guidelines, but nothing concrete has been passed as of 2025. Until then, taxpayers are left navigating a system where the act of earning is technically banned, but the profit is theoretically taxable.

Regional Comparison: Isolation vs. Regulation

When you look at neighboring countries, Bangladesh’s isolation becomes stark. Other South Asian nations are moving toward structured regulation rather than outright bans. For instance, Pakistan established the Pakistan Digital Assets Authority (PDAA) in May 2025 to oversee exchanges and wallets. India implemented a clear tax framework with a 30% tax on crypto profits and a 1% Tax Deducted at Source (TDS), generating billions in revenue.

This contrast highlights a potential economic cost for Bangladesh. By maintaining a comprehensive ban, the country misses out on the innovation, investment, and tax revenues seen in neighbors. It also pushes activity further underground, reducing transparency rather than increasing it.

Legal Expert Opinion and Future Outlook

Academic and legal experts in Bangladesh are increasingly vocal about the ineffectiveness of the current ban. Dr. B M Mainul Hossain, a professor at Dhaka University, has publicly argued that prohibition is not a sustainable solution. The sentiment among many professionals is that regulation would better serve public interests by bringing transactions into the light.

The persistence of the underground market proves that demand exists regardless of policy. The real question facing policymakers is whether to strengthen the legal basis for the ban by amending FERA to explicitly include digital assets, or to pivot toward a regulatory model similar to India or Pakistan. Given the definitional gaps in the 1947 Act, legal challenges to prosecutions under FERA could succeed, forcing the government to either update its laws or abandon the ban.

For now, the status quo remains: high risk, low clarity, and a reliance on informal networks. Anyone engaging with digital assets in Bangladesh does so at their own peril, navigating a system where the law lags far behind the technology.