Nigeria’s Central Bank Lifts Crypto Transaction Ban, Embraces Regulation in Latest Move

Bits Logics Team . 24th Dec 2023
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  • Nigeria’s Central Bank (CBN) has announced the lifting of the ban on transacting in cryptocurrencies
  • CBN acknowledged the evolving global landscape and emphasized the necessity of regulating VASPs.
  • According to a September report by blockchain research firm Chainalysis, Nigeria was ranked second in overall index rating.

Nigeria’s Central Bank (CBN) has announced the lifting of the ban on transacting in cryptocurrencies, as reported by Rueters. The decision comes with a recognition of global trends, indicating a need for regulatory frameworks to govern activities involving virtual assets.

The initial ban, implemented in February 2021, prohibited banks and financial institutions in Nigeria from dealing with or facilitating transactions in crypto assets, citing concerns about money laundering and terrorism financing risks. Following this, the Securities and Exchange Commission (SEC) of Nigeria introduced regulations in May of the same year, signaling the country’s attempt to strike a balance between an outright ban and unregulated use of crypto assets.

In a circular dated December 22, the CBN acknowledged the evolving global landscape and emphasized the necessity to regulate virtual asset service providers (VASPs), encompassing cryptocurrencies and crypto assets. The guidelines outlined in the circular detail how banks and financial institutions should open accounts, provide designated settlement accounts and services, and act as channels for forex inflows and trade for entities engaging in crypto asset transactions.

The circular specifies that VASPs must obtain licensing from the Nigerian SEC to conduct crypto-related business. The CBN made it clear that while banks are now allowed to facilitate crypto transactions, they are still barred from trading, holding, or transacting in cryptocurrencies themselves.

Nigeria, known for its young and tech-savvy population, has witnessed a growing adoption of cryptocurrencies. Despite the previous restrictions, peer-to-peer trading through crypto exchanges has been popular, allowing individuals to navigate the financial sector more freely.

According to a September report by blockchain research firm Chainalysis, Nigeria was ranked second in overall index rating. This country also obtained first place when it comes to P2P exchange trade volume ranking

The recent regulatory changes aim to create a structured framework for the crypto industry in Nigeria, balancing the innovation brought by digital assets with the need for oversight and risk management.