According to Forbes, the Central Bank of Nigeria issued a notice last week (22nd) to all banks and financial institutions, lifting the ban on cryptocurrency trading. With the growing importance and presence of Bitcoin and stablecoins in the daily lives and economy of the country, the new regulations are seen as a positive step taken by the country’s regulatory authorities to provide better regulatory clarity.
Due to the lack of cryptocurrency regulations and consumer protection measures, coupled with concerns over money laundering and terrorist financing, the Central Bank of Nigeria intervened in February 2021 and issued a notice prohibiting local banks from allowing bank accounts to be directly linked to cryptocurrency transactions. This led to businesses having to adapt to this drastic change, with some companies being forced to shut down.
However, one consequence of this policy was the growth of Nigeria’s peer-to-peer (P2P) cryptocurrency market. According to data from Chainalysis, cryptocurrency trading volume in Nigeria increased by 9% year-on-year to reach $56.7 billion between July 2022 and June 2023. In addition, according to the “Chainalysis 2023 Global Cryptocurrency Adoption Index” report, Nigeria ranked first in P2P trading volume and second in overall adoption rate, a significant improvement from the previous year’s 17th and 11th rankings.
In the notice issued last Friday, the Central Bank of Nigeria cited global trends and guidance from the Nigerian Securities and Exchange Commission as the reasons for lifting the previous ban, and introduced clearer regulatory and guidance measures for digital asset and virtual asset service providers’ activities. These guidelines outline the activities that banks and financial institutions are allowed to engage in when opening accounts for virtual asset trading and facilitating the inflow of foreign exchange and virtual asset transactions. The Central Bank of Nigeria also stipulated that local banks and financial institutions are not allowed to hold, trade, or transmit cryptocurrencies themselves.
The new rules also introduce strict Know Your Customer (KYC), Anti-Money Laundering (AML), and other related measures and checks, including requiring VASPs to obtain licenses issued by the Nigerian Securities and Exchange Commission in order to operate bank accounts in the country.
VASPs operating in Nigeria as exchanges must also comply with the new guidelines set by the Nigerian Securities and Exchange Commission, such as meeting a minimum paid-up capital of 500 million Naira (approximately $550,000), being registered with the Corporate Affairs Commission of Nigeria, and obtaining approval from the Securities and Exchange Commission to launch tokens.
