Nigeria's Central Bank has officially lifted the ban on transacting in cryptocurrencies, marking a notable shift in its stance on digital assets.
In a circular dated December 22, the Central Bank of Nigeria (CBN) acknowledged global trends and the necessity for regulatory frameworks while providing guidelines for financial institutions engaging in cryptocurrency-related activities.
The CBN had initially imposed a ban on crypto transactions in February 2021, citing concerns related to money laundering and terrorism financing risks.
This move prompted Nigeria's Securities and Exchange Commission (SEC) to publish regulations in May of the same year, indicating the country's attempt to strike a balance between a complete ban and unregulated use of crypto assets.
According to the latest circular, the CBN stated, “Current trends globally have shown there is a need to regulate the activities of virtual asset service providers (VASPs), which include cryptocurrencies and crypto assets.”
The guidelines outline specific measures for banks and financial institutions (FIs) to open accounts, provide designated settlement accounts and services, and act as channels for foreign exchange inflows and trade for businesses involved in crypto assets.
Notably, VASPs are required to obtain a license from the Nigerian SEC to operate in the crypto business.
The circular emphasizes that financial institutions must adhere to the guidelines when opening or permitting the operation of accounts for individuals or entities conducting virtual/digital asset businesses.
Despite the relaxation of certain restrictions, the CBN maintains its prohibition on banks trading, holding, or transacting in cryptocurrencies.
The central bank's decision reflects its efforts to strike a balance between regulatory oversight and meeting the demands of Nigeria's tech-savvy population, which has shown a keen interest in cryptocurrencies.
Nigeria's young and technology-driven demographic has embraced cryptocurrencies, utilizing platforms like peer-to-peer trading offered by crypto exchanges to circumvent traditional financial channels.
A September report by New York-based blockchain research firm Chainalysis revealed that the volume of crypto transactions in Nigeria witnessed a 9% year-over-year growth, reaching $56.7 billion between July 2022 and June 2023.
