The Central Bank of Nigeria (CBN) has announced the lifting of restrictions on banks facilitating cryptocurrency transactions in a circular sent to banks on December 22. This move is anticipated to intensify competition among crypto-fiat exchanges and peer-to-peer (P2P) marketplaces, as the initial ban had given P2P investors a dominant position.
The original intent of the ban was to eradicate the use of Bitcoin and other cryptocurrencies in Nigeria. However, it led to the crypto community focusing more on P2P transactions and direct payments to each other.
Nathaniel Luz, the co-founder and CMO of Flincap, commented on the lifting of the ban, stating that it is a significant positive development for the sector. He suggested that this move indicates Nigeria is ready to host and operate crypto companies.
Luz emphasized that with the ban lifted, institutional exchanges must prepare for the Nigerian market, as the absence of these services during the ban had significantly impacted other crypto businesses. He predicted a survival of the fittest scenario among crypto-fiat exchanges and P2P investors in the world’s largest P2P crypto market.
In response to whether the requirement to register with Nigerian authorities would deter exchanges from entering Nigeria, Luz believed that despite the challenges for newcomers, this would benefit the crypto sector. He drew parallels with changes in Nigeria’s banking sector in 2010, which led to a stronger banking industry through acquisitions and mergers.
In February 2021, the CBN had prohibited all regulated financial institutions from serving crypto exchanges, marking a significant step. However, the recent circular acknowledges that the increasing global demand and adoption of cryptocurrencies made it unjustifiable to continue the strict restrictions imposed on financial institutions in 2021.