In a noteworthy shift, Nigeria’s Central Bank has opted to rescind the ban on cryptocurrency transactions, recognizing global trends that underscore the necessity of regulating such activities. This reversal follows the Central Bank of Nigeria (CBN) imposing a ban in February 2021, prohibiting banks and financial institutions from participating in or facilitating transactions involving crypto assets due to concerns related to money laundering and terrorism financing risks.
In response to this ban, Nigeria’s Securities and Exchange Commission (SEC) took action in May of the same year by issuing regulations for digital assets. These regulations aimed to strike a balance between avoiding an outright ban on crypto assets and preventing their unregulated use in Africa’s most populous country.
In a circular dated December 22, the CBN acknowledged that recent global trends emphasize the importance of regulating virtual asset service providers (VASPs), encompassing cryptocurrencies and crypto assets. The new guidelines delineate how banks and financial institutions should approach transactions involving crypto assets. This includes the requirement to open designated accounts, provide settlement services, and serve as channels for foreign exchange inflows and trade for firms dealing in crypto assets.
For VASPs to engage in the crypto business, the CBN mandates obtaining a license from the Nigerian SEC. The circular emphasizes that financial institutions should not open or allow the operation of any account for conducting virtual/digital asset business unless it aligns with the specified guidelines.
However, it is noteworthy that the CBN still maintains the prohibition on banks trading, holding, or transacting in cryptocurrencies. This cautious approach reflects the delicate balance that regulatory authorities aim to strike between embracing innovation and addressing potential risks associated with the burgeoning crypto space.
Nigeria’s youthful and tech-savvy population has swiftly embraced cryptocurrencies, often resorting to peer-to-peer trading on crypto exchanges to navigate around the traditional financial sector. According to a September report by the New York-based blockchain research firm Chainalysis, the volume of crypto transactions in Nigeria experienced a notable 9% year-over-year growth, reaching $56.7 billion between July 2022 and June 2023.