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The Central Bank of Nigeria (CBN) has lifted the ban on cryptocurrency transactions in the country in a significant reversal of its previous stance. The change was announced through a circular on Dec. 22. It allows Nigerian banks and other financial institutions to resume operations with cryptocurrency service providers. The initial ban, imposed in February 2021, was primarily enacted over concerns related to money laundering and terrorism financing risks associated with crypto assets. Under the new guidelines, financial institutions are now allowed to open accounts for businesses dealing in virtual/digital assets, but these accounts must be specifically designated for that purpose. Banks and other financial institutions must comply with the requirements outlined in the CBN’s guidelines when dealing with accounts for crypto-related businesses. Meanwhile, Virtual Asset Service Providers (VASPs) involved in the crypto business are required to be licensed by the Nigerian Securities and Exchange Commission. While they can facilitate transactions for VASPs, banks, and financial institutions are still barred from trading, holding, or transacting in cryptocurrencies on their own accounts. The lifting of the ban is expected to significantly impact the Nigerian financial landscape, given the country’s young, tech-savvy population that has shown a keen interest in cryptocurrencies. According to a report by Chainalysis, the volume of crypto transactions in Nigeria grew by 9% year-over-year to $56.7 billion between July 2022 and June 2023. While the lifting of the ban opens up opportunities, it also presents challenges in ensuring compliance with international standards for preventing illegal activities. It underscores the need for a balanced approach that encourages innovation while safeguarding against risks.
