Nigeria Lifts Ban on Cryptocurrency Transactions

Nigeria's Cryptocurrency Ban Lifted

Nigeria's central bank has lifted its ban on cryptocurrency transactions, acknowledging the global trend towards regulating digital assets. This marks a significant policy shift since the Central Bank of Nigeria (CBN) had previously prohibited banks from facilitating crypto transactions due to concerns over money laundering and terrorism financing.

Regulatory Developments

Following the initial ban in February 2021, Nigeria's Securities and Exchange Commission (SEC) introduced regulations for digital assets in May of the previous year. This move aimed to balance between a complete ban and the unregulated use of cryptocurrencies. The CBN's recent circular emphasizes the need for regulation, aligning with international practices.

New Guidelines for Financial Institutions

The CBN has outlined comprehensive guidelines for banks and financial institutions to engage with crypto transactions. These include opening designated settlement accounts and providing forex inflow channels for crypto firms. However, banks remain prohibited from trading or holding cryptocurrencies directly.

Licensing and Compliance

Virtual Asset Service Providers (VASPs) in Nigeria must obtain licenses from the SEC to operate legally in the crypto space. Financial institutions must ensure accounts related to digital assets comply with these new regulations.

Growing Crypto Adoption

Despite previous restrictions, Nigeria's young and tech-savvy population has rapidly embraced cryptocurrencies, often using peer-to-peer trading platforms to circumvent traditional financial systems. This adoption is reflected in a 9% increase in crypto transaction volume, reaching $56.7 billion between July 2022 and June 2023, according to a blockchain research firm.

This regulatory evolution positions Nigeria to harness the benefits of cryptocurrencies while mitigating associated risks.