Nigeria’s central bank lifts crypto ban, introduces new regulations

The Central Bank of Nigeria has lifted its ban on cryptocurrency transactions, acknowledging the global trend towards regulating digital assets, according to a recent Reuters report. This move marks a departure from the bank’s February 2021 decision, which prohibited banks and financial institutions from engaging in crypto-related activities due to concerns over money laundering and terrorism financing.

The change in stance aligns with the Nigerian Securities and Exchange Commission’s efforts to establish a regulatory framework for digital assets. In May last year, the SEC released regulations for virtual assets, signaling Nigeria’s intent to balance between an outright crypto ban and unregulated usage.

Under the new guidelines issued on Dec. 22, banks and financial institutions are required to open designated accounts and provide settlement services for firms dealing in cryptocurrencies and crypto assets. However, these institutions are still prohibited from directly trading, holding, or transacting in cryptocurrencies.

To operate in the crypto business, Virtual Asset Service Providers must obtain a license from the Nigerian SEC. The CBN’s circular specifies that financial institutions must not open or operate any accounts for entities engaged in virtual/digital assets without proper designation and adherence to the new guidelines.

This policy reversal comes amid Nigeria’s growing cryptocurrency market, driven by a young and tech-savvy population. Despite regulatory hurdles, Nigerians have increasingly turned to peer-to-peer crypto trading to bypass financial sector restrictions. According to a report by Chainalysis, Nigeria’s crypto transaction volume surged by 9% year-over-year, reaching $56.7 billion between July 2022 and June 2023.