The Central Bank of Nigeria (CBN) has lifted its ban on cryptocurrency transactions, stating in a circular dated 22 December, that it was acknowledging global trends that indicate the necessity of regulating such activities.
Initially implemented in February 2021, the ban prevented banks and financial institutions in Nigeria from engaging in or facilitating transactions involving crypto assets, with the CBN citing concerns about money laundering and terrorism financing as the reason for its decision.
Following this, Nigeria’s Securities and Exchange Commission (SEC) introduced regulations in May of the same year for digital assets, signalling the country’s attempt to strike a balance between an outright ban on crypto assets and unregulated usage.
In the circular, the CBN noted the evolving global landscape, stressing the need to regulate the activities of Virtual Asset Service Providers (VASPs), encompassing cryptocurrencies and crypto assets.
The updated guidelines detail the procedures for banks and financial institutions to open accounts, provide designated settlement accounts and settlement services, and serve as channels for foreign exchange inflows and trade for entities involved in crypto asset transactions. VASPs are now required to obtain licensing from the Nigerian SEC to operate in the crypto business.
The CBN stated, “from the commencement of these rregulations, FI shall not open or permit the operation of any account by any person or entity to conduct the business of virtual/digital assets unless that account is designated for that purpose and opened in line with the requirement of these Guidelines.”
However, the CBN that banks are still prohibited from trading, holding, or transacting in cryptocurrencies.
Despite regulatory restrictions, Nigeria’s tech-savvy and youthful population has actively embraced cryptocurrencies, utilising peer-to-peer trading on crypto exchanges to bypass traditional financial sector channels. According to a September report by New York-based blockchain research firm Chainalysis, the volume of crypto transactions in Nigeria witnessed a 9% year-over-year increase, reaching $56.7 billion between July 2022 and June.
