In a significant shift, Nigeria’s Central Bank has decided to lift the ban on transacting in cryptocurrencies, acknowledging global trends that emphasize the necessity of regulating such activities. This reversal comes after the Central Bank of Nigeria (CBN) imposed a ban in February 2021, prohibiting banks and financial institutions from engaging in or facilitating transactions involving crypto assets due to concerns related to money laundering and terrorism financing risks.
Following this ban, Nigeria’s Securities and Exchange Commission (SEC) took steps in May of the same year by publishing 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 stated that recent global trends underscore the importance of regulating virtual asset service providers (VASPs), encompassing cryptocurrencies and crypto assets. The new guidelines outline how banks and financial institutions should approach transactions involving crypto assets. This includes opening designated accounts, providing settlement services, and serving as channels for foreign exchange inflows and trade for firms dealing in crypto assets.
For VASPs to participate in the crypto business, the CBN mandates that they obtain 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’s 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 been quick to embrace cryptocurrencies, often resorting to peer-to-peer trading on crypto exchanges to navigate around the traditional financial sector. According to a report by New York-based blockchain research firm Chainalysis in September, 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.
