In a significant policy shift, the Central Bank of Nigeria (CBN) has reversed its ban on cryptocurrency transactions, acknowledging the global trend towards regulating such activities. This move marks a notable departure from the CBN’s February 2021 stance, which prohibited banks and financial institutions from dealing with or facilitating transactions in crypto assets, citing concerns over money laundering and terrorism financing.
The CBN highlighted the necessity of regulating the operations of Virtual Asset Service Providers (VASPs) that deal with cryptocurrencies and crypto assets in its latest circular dated December 22. The guidelines outline specific steps for banks and financial institutions, including account opening, providing designated consensus accounts, and serving as forex entries and trading channels for entities involved in crypto asset transactions.
Notably, VASPs are required to obtain a license from the Nigerian Securities and Exchange Commission (SEC) to engage in the crypto business. While the circular permits banks to enter the crypto asset business under the new regulations, it emphasizes that direct trading, holding, or transacting in cryptocurrencies remains prohibited. This nuanced approach reflects Nigeria’s delicate balance between fostering innovation in the crypto space and mitigating associated risks.
Known for its young and tech-savvy population, Nigeria has become a significant player in adopting cryptocurrencies. Peer-to-peer trading provided by crypto exchanges has gained popularity among the populace, allowing them to navigate the financial sector independently.
According to a report published in September by New York-based Blockchain research firm Chainalysis, Nigeria’s crypto transaction volume showed a notable year-over-year growth of 9%, reaching $56.7 billion between July 2022 and June 2023. The reopening of cryptocurrency transactions under a regulated framework is expected to foster a conducive environment for continuous innovation and participation in Nigeria’s crypto asset space.