The Central Bank of Nigeria Lifts Ban on Crypto Service Providers
The Central Bank of Nigeria (CBN) has announced the lifting of a ban that previously prevented banks from operating accounts for cryptocurrency service providers in the country. According to a circular sent to banks, these financial institutions can now open accounts for Virtual Assets Service Providers (VASPs) registered with the Securities and Exchange Commission (SEC), subject to stringent know-your-customer (KYC) and anti-money laundering checks.
Background: CBN’s Ban on Crypto Trading
In February 2021, the CBN imposed a ban on crypto trading activities, which included ordering the closure of related bank accounts. This ban was implemented due to concerns about unregulated cryptocurrencies being used for money laundering and financing terrorism. However, this move disrupted Nigeria’s growing crypto market and caused difficulties for users trying to buy and sell their assets.
Recognition of the Need for Regulation
The CBN has now recognized the importance of regulating Virtual Assets Service Providers (VASPs) in light of global trends in crypto asset recognition and adoption. To address this, the central bank has issued guidelines to establish compliant relationships between banks and VASPs.
“In view of the foregoing, the CBN hereby issues this Guidelines to provide guidance to financial institutions under its regulatory purview in respect of their banking relationship with VASPs in Nigeria…” said Haruna Mustafa, the director of Financial Policy and Regulation Department.
Restrictions on Banks’ Crypto Activities
While banks can now open designated accounts for VASPs, they are still prohibited from holding, trading, or transacting cryptocurrencies from these accounts. This restriction is part of ongoing efforts by Nigeria to implement regulatory measures in the crypto sector.
Nigeria’s Booming Crypto Sector
Despite the regulatory challenges, Nigeria’s crypto sector continues to thrive. A recent survey found that the country leads in crypto awareness globally, with 99% of its citizens having heard of cryptocurrencies and 91% expressing willingness to invest. Additionally, the Nigerian Federal Ministry of Communications and Digital Economy approved the National Blockchain Policy earlier this year, signaling the country’s commitment to utilizing blockchain technology.
Hot Take: Nigeria Takes a Step Towards Crypto Regulation
The Central Bank of Nigeria’s decision to lift the ban on banks operating accounts for cryptocurrency service providers is a significant development for Nigeria’s crypto market. By recognizing the need for regulation and establishing guidelines for compliant relationships between banks and Virtual Assets Service Providers (VASPs), the CBN is taking steps towards creating a safer and more transparent environment for crypto transactions. While banks are still restricted from directly engaging in crypto activities, this move shows a growing acceptance of cryptocurrencies in Nigeria and sets the stage for further regulatory measures in the future.
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