Nigeria Central Bank Lifts Ban On Cryptocurrency Trading

Nigeria Central Bank Lifts Ban On Cryptocurrency Trading

In a groundbreaking shift, the Central Bank of Nigeria (CBN) has reversed its previous ban on cryptocurrency dealings, signalling a new era for Bitcoin and other digital currencies in Africa’s largest economy. This development, revealed in a circular on December 22 reversing the 2021 directive from the financial regulator that prohibited financial institutions from facilitating cryptocurrency transactions, marks a significant change in Nigeria’s approach to digital currencies.

Nigeria Regulator Makes U-Turn On Blanket Ban

Initially, the 2021 ban was instituted over concerns of money laundering and terrorism financing risks associated with cryptocurrencies. However, the global financial scene has been rapidly adapting to the growing influence of Virtual Asset Service Providers (VASPs), including cryptocurrencies and crypto assets. This global trend led the Financial Action Task Force (FATF) in 2018 to update its Recommendation 15, advocating for the regulation of VASPs to curtail the misuse of virtual assets.

Related news: Don’t Ban Cryptocurrencies, Vice President of Nigeria Urges CBN

Complementing this international stance, Nigeria’s Money Laundering Act 2022 recognized VASPs as part of the financial institution framework. In a parallel move, the Nigerian Securities and Exchange Commission (SEC) in May 2022 set forth rules for the issuance, offering, and custody of digital assets and VASPs, providing a much-needed regulatory framework for their operation within the country.

The CBN’s latest guidelines, which override the previous circulars from January 2017 and February 2021, still maintain certain restrictions. Banks and financial institutions are barred from holding, trading, and transacting in virtual currencies on their own account. However, they are now guided on how to maintain banking relationships with VASPs in Nigeria.

Impact on Bitcoin Adoption and Cryptocurrency Market

This regulatory update is expected to significantly influence Bitcoin adoption in Nigeria. As reported by Chainalysis, a New York-based blockchain research firm, Nigeria has seen a remarkable 9% increase in crypto transactions year-over-year, with the volume reaching $56.7 billion between July 2022 and June 2023. This surge is indicative of the rising interest in cryptocurrencies among Nigerians, driven by the need to mitigate challenges like inflation and currency devaluation.

The easing of restrictions by the CBN is likely to attract more international cryptocurrency exchanges and businesses to Nigeria. This could further integrate the country into the global digital economy and signal to both local and international communities Nigeria’s readiness to embrace technological innovations.

The decision by the CBN not only aligns Nigeria with global regulatory trends but also reflects a growing recognition of the potential of digital currencies to positively impact the financial sector. As Nigeria continues to explore the potentials of digital currencies, the rise in Bitcoin adoption could herald a new chapter in the country’s financial landscape, offering innovative opportunities for growth and digital transformation.

Related Reading: XRP Holds 2% of Banks’ €9.4 Billion Crypto Exposure

In sum, the CBN’s revised stance on cryptocurrencies opens new avenues for investors and users in Nigeria’s dynamic cryptocurrency market, marking a pivotal moment in the country’s journey towards embracing digital financial technologies.

Disclaimer: The information in this article should not be considered financial advice, and FXCryptoNews articles are intended only to provide educational and general information. Please consult with a financial advisor before making any investment decisions.

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