Nigeria’s regulatory body, the Central Bank of Nigeria (CBN) at the weekend issued a circular to all banks and Financial Institutions that lifted its ban on bitcoin, and outlined new guidelines for Virtual Asset Service Providers in Nigeria.
This new regulation is yet another positive step by the regulator in its bid to provide better regulatory clarity as the global growth and importance of bitcoin and stablecoins affects the daily lives of Nigerians and the Nigerian economy more broadly.
In February of 2021, the CBN stepped in and filled the void created by the lack of crypto regulation and consumer protection measures, coupled with their fears of money laundering and terror financing, to issue its now infamous circular, which saw the prohibition of Nigerian banks from allowing bank accounts to be directly tied to crypto transactions. This resulted in the shutdown of some virtual asset firms, while some other adjusted to the drastic change.
However, a consequence of the circular was the growth of Nigeria’s peer-to-peer (P2P) crypto market, which is now dominant globally.
According to a research analysis by Chainalysis, Nigeria’s crypto transaction volume surged by 9% YoY to $56.7B between July 2022 and June 2023. Additionally, per the Chainalysis 2023 Global Crypto Adoption Index report, Nigeria ranked 1st for P2P exchange trade volumes and 2nd for overall adoption, rising from its previous ranks of 17th and 11th, respectively, a year prior in their 2022 edition of that report.
In a Friday circular to all banks and other FIs, the CBN communicated their “Guidelines On Operations of Bank Accounts For Virtual Assets Service Providers (VASPs).” The CBN cited global trends and guidelines from the Nigerian SEC as reasons for lifting its previous restrictions, as well as its introduction of more regulatory clarity and guidelines for digital assets and activities of VASPs.
The guidelines outline permitted activities between banks and FIs when opening accounts for virtual asset transactions and facilitating foreign exchange inflows and virtual asset trade for VASPs. The CBN also stated that Nigerian banks and FIs are prohibited from holding, trading, and transacting cryptocurrencies for themselves.
