The Central Bank of Nigeria (CBN) has lifted the ban on conducting transactions involving cryptocurrencies, a shift in its approach towards regulating these digital assets.
The decision was outlined in the bank’s latest circular, highlighting the need for regulation amidst global trends in the crypto sphere.
In February 2021, the CBN had prohibited banks and financial institutions from engaging in crypto asset transactions, citing concerns related to money laundering and the financing of terrorism.
Subsequently, in May of the following year, Nigeria’s Securities and Exchange Commission (SEC) introduced regulations for digital assets. These regulations aimed to establish a balance between curbing unregulated crypto asset use and implementing a complete ban.
In its recent circular dated December 22, the CBN emphasized the necessity of regulating activities associated with virtual asset service providers (VASPs), encompassing cryptocurrencies and crypto assets.
The new guidelines outline specific procedures for banks and financial institutions to engage with crypto-related businesses, including opening designated accounts, providing settlement services, and facilitating foreign exchange transactions for firms involved in crypto assets.
VASPs intending to operate in the crypto business will require licensing from the Nigerian SEC, ensuring compliance with regulatory standards.
The CBN specified that financial institutions are still prohibited from trading, holding, or conducting transactions involving cryptocurrencies directly.
Nigeria’s tech-savvy youth have actively embraced cryptocurrencies, often resorting to peer-to-peer trading facilitated by crypto exchanges as an alternative to traditional financial services.
A report by New York-based blockchain research firm Chainalysis revealed a 9% year-over-year surge in crypto transactions in Nigeria, amounting to $56.7 billion between July 2022 and June 2023.
The lifting of the ban and the subsequent regulations signify a nuanced approach by Nigerian authorities, acknowledging the growing influence of cryptocurrencies while emphasizing the need for a regulated framework to govern their usage within the country.