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.