Nigeria’s central bank lifts cryptocurrency ban

Central Bank of Nigeria – CC BY-SA

The Central Bank of Nigeria (CBN) has lifted its ban on cryptocurrency transactions, as revealed in its recent circular issued on December 22.

The CBN banned banks and financial institutions from engaging in or facilitating transactions involving crypto assets in February 2021, citing concerns about money laundering and terrorism financing.

“However, current trends globally have shown that there is a need to regulate the activities of virtual assets service providers (VASPs) which include cryptocurrencies and crypto assets,” the CBN said in the circular.

The recent guidelines detail how banks and financial institutions should handle accounts, offer designated settlement accounts and services and facilitate forex inflows and trading for companies dealing in crypto assets.

“Starting with the introduction of these Regulations, financial institutions (Fl) cannot open or allow any account for conducting virtual/digital asset business unless it’s specifically designated for that purpose and complies with these Guidelines,” the CBN said.

However, the CBN maintained its restriction on trading, holding cryptocurrencies for banks.

CBN’s new guidelines aim for transparency

Abubakar Nur Khalil, CEO of Recursive Capital, views the CBN’s new guidelines as a necessary move toward a clearer regulatory environment for virtual assets. However, the circular also brings in strict measures like KYC and AML. VASPs will also be required to get a Nigerian SEC license to operate bank accounts in Nigeria.

He highlighted section 7.9 of the circular, which details provisions for designated settlement accounts. He said this section specifies essential guidelines for forex.

“Transactions on VASPs and Digital Assets platforms shall only be in Naira,” the section reads.

Additionally, it covers guidelines for debit, credit and settlement related to FX positions on VASP platforms and accounts.

The CBN’s circular followed new guidelines issued by the Nigerian SEC. The guidelines dictate that virtual asset service providers (VASPs) acting as exchanges in Nigeria must meet a minimum paid-up capital of N500 million ( around $550,000), register with the Nigerian Corporate Affairs Commission and obtain approval from the SEC to launch tokens.

Nigeria’s crypto industry pushing blockchain policy regulation

The Nigerian crypto industry has been urging the government to implement regulations that enable the broader integration of blockchain technology in the country.

Obinna Iwuno, president of the Stakeholders in Blockchain Association of Nigeria (SiBAN), emphasized the need for a regulatory framework to speed up the adoption of blockchain technology across various sectors of the economy.

“We are ready for full adoption now, and the blockchain policy initiated by the government positions Nigeria as a trailblazer in the continent’s digital economy landscape if fully implemented,” said Iwuno.

Nigeria’s crypto usage continues to surge, report says

In a report published in September, Chainalysis revealed that Nigeria had seen a nine percent year-over-year increase in crypto transactions, reaching $56.7 billion between July 2022 and June 2023.

Interest in bitcoin and stablecoins surged when the value of the Naira declined, especially during severe drops in June and July of 2023. The currency reached record lows following President Bola Tinubu’s implementation of significant reforms. These reforms included ending a petrol subsidy and lifting certain exchange rate restrictions.

“People are constantly looking for opportunities to hedge against the devaluation of the naira and the persistent economic decline since COVID,” Nigeria-based crypto exchange Busha co-founder Moyo Sodipo said in a statement shared with the report.