The Central Bank of Nigeria (CBN) has announced lifting its ban on cryptocurrency transactions, acknowledging the need to regulate activities in this sector.
The CBN initially prohibited banks and financial institutions from engaging in or facilitating crypto transactions in February 2021. Concerns over money laundering and terrorism financing risks drove the decision.
Following the initial ban, the Nigeria Securities and Exchange Commission (SEC) issued regulations for digital assets in May of the following year, signalling an effort to balance completely banning crypto assets and allowing their unregulated use. The latest circular from the CBN, dated December 22, outlines the necessity to regulate Virtual Asset Service Providers (VASPs), which encompasses cryptocurrencies and crypto assets.
The guidelines detail procedures for banks and financial institutions on account openings, designated settlement accounts, settlement services, and forex inflows for entities dealing in crypto assets. However, banks are still prohibited from trading, holding, or directly transacting in cryptocurrencies.
Impact on Nigeria’s Crypto Market
Nigeria’s tech-savvy youth have quickly adopted cryptocurrencies, often resorting to peer-to-peer trading to bypass the financial sector. A report by Chainalysis in September revealed a 9% year-over-year increase in the volume of crypto transactions in Nigeria, amounting to $56.7 billion between July 2022 and June 2023. This regulatory shift by the CBN could potentially influence the growing trend of cryptocurrency adoption in Nigeria.
