Moniepoint and Paga, two financial service providers, have recently communicated to their customers that any accounts found to be involved in cryptocurrency transactions will be subject to closure. This development follows the directive from the Central Bank of Nigeria (CBN) that instructed certain newly established banks, including Moniepoint, to halt the onboarding of new customers.
This action represents a significant shift from the Central Bank of Nigeria’s previous stance, which indicated an intention to reverse the prohibition on cryptocurrency dealings that was originally put in place in 2021. In a notice distributed to its customers on May 2, 2024, Moniepoint explicitly stated, “In accordance with CBN regulations, we will terminate the accounts of individuals engaged in cryptocurrency or other virtual asset transactions and will report their information to the appropriate authorities.”
Similarly, Paga, which operates under a license from the CBN, has informed its customers via email of its obligation to adhere to all regulations set forth by the CBN. The email included a reminder about the CBN’s directive, citing the circular FPR/DIR/GEN/CIR/06/10, which explicitly prohibits the involvement in or facilitation of cryptocurrency and other virtual currency transactions.
The circular mentioned by Paga dates back to 2017 and serves as a caution to banks and other financial institutions regarding their interactions with cryptocurrency exchanges and customers engaged in cryptocurrency transactions.
Contrastingly, a more recent circular from the CBN, issued in December 2023, outlined a different approach. This document instructed financial institutions to establish accounts, provide specific settlement accounts and services, and serve as conduits for foreign exchange inflows and trade activities for entities dealing in crypto assets. The 2023 circular was intended to override the earlier directives from 2017 and the subsequent 2021 circular that imposed restrictions on banks and financial institutions from maintaining accounts for cryptocurrency service providers.
Consequently, the recent declarations by Moniepoint and Paga regarding the closure of accounts involved in cryptocurrency transactions could be indicative of a potential reinstatement of the cryptocurrency ban by the Central Bank of Nigeria (CBN), which was originally established in 2021 but seemed to have been lifted based on the December 2023 circular.
This situation is particularly noteworthy because Moniepoint is among the financial entities that received a directive from the CBN to cease the onboarding of new customers. This move by the CBN to target specific institutions, including Moniepoint, and the subsequent actions taken by Moniepoint and Paga to warn their customers about the prohibition of cryptocurrency transactions, suggest a complex and evolving regulatory environment for cryptocurrencies in Nigeria.
It raises questions about the consistency and future direction of the CBN’s policy on digital currencies and the implications for financial service providers operating within the country’s regulatory framework.
The directives issued by the Central Bank of Nigeria (CBN), which are leading financial service providers like Moniepoint and Paga to take a hard stance against cryptocurrency transactions, seem to be part of a broader effort to combat illegal foreign exchange (FX) transactions in Nigeria. The CBN’s stringent measures are likely aimed at maintaining control over the country’s financial system and curbing activities that could undermine the stability of the national currency, the Naira.
However, these regulatory actions could have unintended consequences. By imposing restrictions on the use of cryptocurrencies through official banking channels, the CBN may inadvertently drive the cryptocurrency market further underground. As a result, crypto-related activities might become less transparent and more difficult for the government to monitor and regulate. This shift could potentially exacerbate the challenges the government faces in maintaining oversight over digital assets.
The push of cryptocurrency usage beyond the government’s purview could lead to an increase in peer-to-peer (P2P) transactions and the use of decentralized platforms that operate outside the traditional financial system. Such a scenario would make it more challenging for the government to enforce its policies and could weaken its grip on the use of digital assets within the country. It also raises concerns about the potential for cryptocurrencies to be used for illicit purposes, as the lack of oversight could create a more permissive environment for illegal activities.
Overall, while the CBN’s directives are likely well-intentioned and aimed at protecting the integrity of Nigeria’s financial system, they may also have the counterproductive effect of diminishing the government’s ability to effectively regulate and benefit from the growing digital asset economy.
