Regulation

Nigeria’s central bank has reversed its ban on cryptocurrency transactions, acknowledging the global need for regulating such activities, as outlined in its recent circular.

Back in February 2021, the Central Bank of Nigeria (CBN) prohibited banks and financial institutions from engaging in or facilitating crypto asset transactions, citing concerns about money laundering and terrorism financing.

Later, the country’s Securities and Exchange Commission (SEC) introduced regulations for digital assets in May the following year, signaling an attempt to strike a balance between banning crypto assets outright and allowing unregulated use.

The CBN, in its circular dated December 22, emphasized the necessity to regulate virtual asset service providers (VASPs), encompassing cryptocurrencies and crypto assets, aligning with global trends.

The updated guidelines outline procedures for banks and financial institutions to open accounts, manage designated settlement accounts, and offer settlement services, acting as intermediaries for forex inflows and trades involving crypto assets.

To engage in the crypto business, VASPs will require licensing from the Nigerian SEC, according to the latest directives.

The CBN explicitly stated that while certain provisions were made for handling crypto assets within the financial system, banks are still prohibited from trading, holding, or conducting transactions involving cryptocurrencies.

Nigeria’s younger, tech-savvy demographic has warmly embraced cryptocurrencies, often utilizing peer-to-peer trading via crypto exchanges to bypass the traditional financial sector.

According to a September report by New York-based blockchain research firm Chainalysis, the volume of crypto transactions in Nigeria increased by 9% year-over-year to $56.7 billion between July 2022 and June 2023.

Reporting on finance offers an exciting journey filled with diverse areas to explore. Recently, delving into the processes of stock “uplisting” and corporate treasury management has uncovered intriguing insights. Contrary to merely handling cash and payments, treasury management involves strategic decisions to optimize cash through various investments. Companies akin to Fortune 500 often have dedicated teams solely focused on this aspect. Now, the spotlight shifts to Bitcoin.

Presently, only a few companies intertwine Bitcoin with their corporate treasuries, alongside conventional investments like T-bills and foreign exchange. A significant deterrent is how accounting treats crypto: losses can be recorded, but not gains. For instance, if a firm buys Bitcoin at $20,000, drops to $15,000, and even surges to $50,000 later, the initial impairment stays, causing both PR and financial complications.

However, a game-changer looms. Accounting standard setters recently revised rules for crypto. As of next December, firms can recognize Bitcoin gains on their balance sheets. If crypto prices persist, this amendment could result in considerable gains for companies like Tesla and Square. The big question is whether other major players, especially from finance or tech sectors, will follow suit and include crypto in their treasuries.

Optimism exists, yet skepticism prevails. Despite accounting concerns resolving, Bitcoin’s extreme volatility could deter many CEOs from taking the plunge. Only founders with substantial shares, like Elon Musk and Jack Dorsey, tend to take unconventional paths with Bitcoin, as seen in Tesla and Block’s strategies.

The enthusiasm of Michael Saylor, MicroStrategy’s CEO, regarding the new accounting rules, seems overly positive. While his vision of Bitcoin as a global treasury reserve asset is ambitious, it’s difficult to fully share the same enthusiasm. However, accountant Lavash suggests the rise of more executives open to adding Bitcoin to treasuries is plausible. Even a 5% increase in big companies embracing Bitcoin could significantly validate crypto. Time will reveal the impact of these shifts in the next year.

The cryptocurrency community is expressing concern over a new bill introduced by U.S. Senator Elizabeth Warren, which critics argue might hinder the growth and innovation of cryptocurrencies. Amidst a turbulent year that included FTX’s insolvency and issues at Binance, the industry braces for potential regulatory changes.

Senator Warren’s bill, called the Digital Assets Anti-Money Laundering Bill, was introduced on December 11 and has gained support from Senators Warnock, Butler, Van Hollen, Hickenlooper, and Luján. This bill seeks to extend the Bank Secrecy Act’s provisions to cover a broader range of entities, including exchanges, miners, validators, service providers, custodians, and crypto wallet entities.

The crypto community views this bill as potentially detrimental to the industry and has voiced strong opposition on social platforms. According to Coin Center’s Neeraj K. Agrawal, the proposed anti-money laundering law is seen as an attack on technological advancement and personal privacy, urging vehement opposition. Galaxy Research suggests that Warren’s rules could essentially prohibit Bitcoin in the U.S., although some users doubt its approval.

Contrarily, last week, the U.S. House of Representatives Committee passed a bill supporting blockchain technology, aiming to foster a distributed ledger system in the country. This move contrasts the potential impact of Senator Warren’s bill on the crypto landscape.