The Central Bank of Nigeria (CBN) has officially lifted restrictions on Nigerian banks facilitating cryptocurrency transactions. This move comes nearly two years after the CBN imposed a comprehensive ban on banks engaging with digital currencies.
In a circular sent to banks on Dec. 22, the CBN acknowledged that the increasing global demand and acceptance of cryptocurrencies make it unjustifiable to uphold the strict restrictions imposed on financial institutions.
The statement noted:
“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 circular provides comprehensive guidelines for the banking industry on establishing accounts for VASPs. These guidelines also aim to ensure effective risk management practices within the sector concerning the activities of licensed VASPs. However, the CBN reiterated that banks and financial institutions are prohibited from trading, holding, or transacting in cryptocurrencies using their own accounts.
Nigeria's CBN has removed restrictions on cryptocurrency transactions. The original 2021 order banned banks from crypto-related transactions.
The latest circular, however, gives clear guidelines supporting crypto, but with stringent customer KYC and anti-money laundering checks. https://t.co/4YW4RKEKGP pic.twitter.com/XCRc7fjz9Y
— Abubakar (@IAtalkspace) December 22, 2023
The move is also consistent with guidelines issued by the country’s Securities and Exchange Commission (SEC) in May last year, providing a regulatory framework for VASPs and digital assets in Nigeria. Enforcement of these regulations became difficult due to CBN’s restrictions on financial institutions.
In early Feb. 2021, CBN ordered banks to close accounts associated with crypto businesses. Nigeria was reportedly fighting terrorism financing and money laundering concerns with the ban. During that period, Nigerian crypto traders flocked to platforms that enabled P2P services, such as Remitano, Paxful, and Binance. This service allowed them to bypass the CBN ban and engage in trading.
The president of the Stakeholders in Blockchain Association of Nigeria (SiBAN), Obinna Iwuno, stressed the need to establish a regulatory framework to enhance the infusion of blockchain technology into the financial industry. Iwuno told Cointelegraph that the country is ready to adopt blockchain technology.
Nigeria’s Position Among Countries With Large Crypto Investors
Nigeria, Africa’s most populous country, has the highest number of cryptocurrency holders. It also stands as one of the prominent nations with a large number of crypto users. Despite the growing engagement of citizens with cryptocurrencies such as Bitcoin (BTC), the Nigerian government has yet to accept BTC as a legal tender. On the other hand, the Central African Republic (CAR) became the first African country and the second globally to accept BTC as legal tender.