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 regulators in Nigeria in providing better regulatory clarity as we continue to see the growth and importance of bitcoin and stablecoins in the daily lives of Nigerians and the Nigerian economy more broadly.
In Feburary 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.
Which resulted in businesses having to adjust to the drastic change, with some shutting down.
However, a consequence of the circular was the growth of Nigeria’s P2P crypto market, which is now dominant globally.
According to 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 states that Nigerian banks and FIs are prohibited from holding, trading, and transacting cryptocurrencies for themselves.