In a significant turn of events, Nigeria’s Central Bank has reversed its ban on cryptocurrency transactions, marking a shift in policy while emphasizing the necessity to regulate such digital activities.
The announcement was made through the bank’s latest circular, recognizing the evolving global landscape surrounding digital assets.
Initially imposed in February 2021, the Central Bank of Nigeria (CBN) had prohibited banks and financial institutions from engaging in or facilitating transactions involving crypto assets due to concerns over money laundering and the financing of terrorism.
However, subsequent developments indicated a reevaluation of this stance. Last year, Nigeria’s Securities and Exchange Commission (SEC) introduced regulations for digital assets, indicating the country’s intention to strike a balance between banning crypto assets outright and allowing unregulated usage.
In a circular dated December 22nd, the CBN acknowledged the necessity to regulate virtual asset service providers (VASPs), encompassing cryptocurrencies and crypto assets, in response to current global trends.
The newly issued guidelines outline specific directives for banks and financial institutions regarding the opening of accounts, providing designated settlement accounts and services, and acting as conduits for foreign exchange inflows and trades for entities dealing in crypto assets.
“From the commencement of these Regulations, Fl 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,” the CBN said
Despite the relaxation of restrictions, the CBN maintained its prohibition on banks participating in the trading, possession, or transaction of cryptocurrencies.
Nigeria, with its youthful and tech-savvy population, has shown a considerable interest in cryptocurrencies, often utilizing peer-to-peer trading facilitated by crypto exchanges as an alternative to traditional financial avenues.
According to a September report by New York-based blockchain research firm Chainalysis, Nigeria witnessed a 9% year-over-year increase in crypto transactions, reaching a substantial $56.7 billion between July 2022 and June 2023.
This reversal of the crypto ban by Nigeria’s Central Bank signifies a notable shift in regulatory approach, recognizing the need to adapt to global trends while emphasizing the importance of structured oversight in the burgeoning cryptocurrency space.
