Nigeria Revisits Crypto Policies: Central Bank Lifts Ban with New Regulations
Summary:
Nigeria’s Central Bank has reversed its ban on cryptocurrency transactions, acknowledging the global need for regulation in the crypto space. The Circular issued on December 22 outlines guidelines for banks and financial institutions, emphasizing the licensing requirement for virtual asset service providers (VASPs). While the new regulations allow for more oversight, the Central Bank continues to restrict banks from directly trading, holding, or transacting in cryptocurrencies.
In a significant shift of policy, Nigeria’s Central Bank has lifted the ban on cryptocurrency transactions, recognizing the evolving global landscape that underscores the importance of regulating virtual assets. The initial ban, imposed in February 2021, cited concerns about money laundering and terrorism financing risks.
The Circular dated December 22 marks a pivotal moment, emphasizing the necessity to regulate the activities of virtual asset service providers (VASPs), encompassing cryptocurrencies and crypto assets. The guidelines provide a framework for banks and financial institutions (FI) to engage with crypto transactions responsibly.
According to the regulations, VASPs must obtain a license from the Nigerian Securities and Exchange Commission (SEC) to operate in the crypto business. The Central Bank explicitly states that FIs should not open or allow the operation of accounts for virtual/digital assets unless designated for that purpose and opened in accordance with the provided guidelines.
However, despite the regulatory openness, the Central Bank maintains its prohibition on banks engaging directly in trading, holding, or transacting with cryptocurrencies. This cautious approach aims to balance the growing interest in cryptocurrencies among Nigeria’s tech-savvy population while addressing concerns related to financial stability and security.
Nigeria, with its young and tech-savvy demographic, has seen a surge in cryptocurrency adoption. Peer-to-peer trading through crypto exchanges has been a popular choice for those seeking alternatives to traditional financial channels. A report by New York-based blockchain research firm Chainalysis revealed a 9% year-over-year growth in crypto transactions in Nigeria, reaching $56.7 billion between July 2022 and June 2023. As the country navigates this regulatory recalibration, the crypto industry anticipates how these new guidelines will shape the landscape for both investors and financial institutions in Nigeria.
