The Central Bank of Nigeria recently declared that the restriction on cryptocurrency transactions will be lifted moving forward. This decision was made as a response to the realization of worldwide trends highlighting the importance of regulating operations of this nature. The bank has informed its customers about this new development through its most recent circular.
How Was the Decision to Ban Cryptoasset Transactions Made?
The policy that forbids banks and other financial organizations from participating in or supporting transactions using crypto assets was put into effect by the Central Bank of Nigeria (CBN) in February 2021. This decision was made in response to concerns regarding the potential risks of money laundering and terrorism financing.
In May of the previous year, Nigeria’s Securities and Exchange Commission (SEC) issued regulations about digital assets, indicating the intent of Africa’s most populous nation to navigate a path that strikes a balance between a complete prohibition of cryptocurrency assets and their unregulated utilization.
Regulation of Cryptocurrency transactions in the Spotlight
Through a circular sent on the 22nd of December, the Central Bank of Nigeria (CBN) brought attention to the necessity of regulating the activities of VASPs, which include cryptocurrencies and crypto assets. This was done given the prevalent patterns that are seen on a worldwide scale.
The most recent guidelines delineate the procedures banks and financial institutions (FI) must adhere to when initiating account openings, offering designated settlement accounts and settlement services, and serving as conduits for foreign exchange inflows and trade for enterprises engaging in crypto-asset transactions.
To partake in the cryptocurrency industry, Virtual Asset Service Providers (VASPs) must obtain the necessary licensing from Nigeria’s Securities and Exchange Commission (SEC).
As per the stipulations outlined in these Regulations, Fl is prohibited from initiating or authorizing the establishment of any account by any individual or organization to engage in virtual/digital asset transactions unless the said account is specifically designated for such activities and adheres to the prescribed guidelines set forth by the Central Bank of Nigeria.
However, the Central Bank of Nigeria (CBN) reiterated that financial institutions are still prohibited from trading, holding, or transacting cryptocurrencies.
Significant Growth in the Aggregate Value of Cryptocurrency Transactions in Nigeria
The country’s youthful and technologically inclined demographic has embraced the adoption of cryptocurrencies in Nigeria. Notably, cryptocurrency exchange-facilitated peer-to-peer trading has emerged as a preferred alternative to traditional financial institutions.
According to a report released in September by Chainalysis, a blockchain research firm headquartered in New York, the aggregate value of cryptocurrency transactions in Nigeria experienced a 9% increase year-over-year, reaching a total of $56.7 billion during the period spanning from July 2022 to June 2023.