Nigeria’s Central Bank has recently made a pivotal decision to lift the ban on cryptocurrency transactions, marking a significant shift in its stance on digital assets. The initial prohibition, implemented in February 2021, barred banks and financial institutions from engaging with cryptocurrencies, citing concerns related to money laundering and terrorism financing.
In its latest circular dated December 22, the Central Bank of Nigeria (CBN) acknowledged the evolving global landscape, recognizing the imperative to regulate virtual asset service providers (VASPs), which encompass cryptocurrencies and crypto assets. This move indicates a nuanced approach by the African nation, attempting to strike a balance between outright bans and unregulated crypto use.
The circular delineates comprehensive guidelines for banks and financial institutions, detailing the process of opening accounts, providing designated settlement services, and acting as conduits for forex inflows related to crypto asset transactions. However, a pivotal aspect of the new regulations stipulates that VASPs must obtain licensing from the Nigerian Securities and Exchange Commission (SEC) to engage in cryptocurrency-related business.
Despite these regulatory adjustments, the CBN maintained its stance against banks trading, holding, or conducting transactions with cryptocurrencies. This cautious approach reflects the delicate balance between embracing the burgeoning crypto industry and safeguarding against potential risks.
Nigeria, home to a vibrant and tech-savvy population, has witnessed widespread adoption of cryptocurrencies. The younger demographic has particularly embraced digital assets, utilizing peer-to-peer trading through crypto exchanges as an alternative to traditional financial services.
A noteworthy report by New York-based blockchain research firm Chainalysis revealed that Nigeria experienced a substantial 9% year-over-year growth in crypto transactions, reaching an impressive $56.7 billion between July 2022 and June 2023. This statistic underscores the resilience and popularity of cryptocurrencies in the country.
As Nigeria navigates the complex intersection of financial innovation, regulatory oversight, and technological advancements, the recent regulatory developments will undoubtedly shape the trajectory of crypto adoption and usage in the nation. The story unfolds at the crossroads of a dynamic digital landscape and traditional financial paradigms.
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Credit: MacDonald Dzirutwe