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In a significant policy shift, the Central Bank of Nigeria has lifted the ban on transactions in cryptocurrencies, embracing the global trend towards regulating such activities. This move marks a notable change from the stance of the Central Bank of Nigeria (CBN) in February 2021, which prohibited banks and financial institutions from dealing in crypto assets or facilitating such transactions, citing concerns over money laundering and the financing of terrorism.
Guiding Principles Announced: CBN Adopts Regulatory Framework for Crypto Assets
In its latest circular dated December 22, the CBN highlighted the need to regulate the activities of crypto asset service providers (VASPs), which encompass cryptocurrencies and crypto assets.
The guidelines outline specific steps including account opening for banks and financial institutions, providing designated correspondent accounts, and serving as forex entries and trading channels for organizations involved in crypto asset transactions.
Specifically, VASPs are required to obtain a license from the Nigerian Securities and Exchange Commission (SEC) to participate in the crypto business.
Banks Allowed to Enter Crypto Space
The circular emphasizes that while banks are now allowed to enter the crypto asset business under the new regulations, direct trading, holding, or transacting in cryptocurrencies is still prohibited. This nuanced approach reflects the delicate balance Nigeria aims to strike between encouraging innovation in the crypto space and mitigating associated risks.
Known for its young and tech-savvy population, Nigeria has become a significant player in the adoption of cryptocurrencies. Peer-to-peer trading provided by crypto exchanges has seen interest among the population, 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-on-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 provide a conducive environment for continuous innovation and participation in Nigeria’s crypto asset space.
