The Central Bank of Nigeria, or CBN, has lifted the ban preventing banks from providing services to cryptocurrency service providers after prohibiting any crypto transactions in 2021 due to concerns of potential money laundering and terrorism financing.
The ban was lifted on December 22 after the central bank issued a notice titled “Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS),” which told banks that they may engage in virtual currency transactions so long they ensure they follow strict rules and avoid any money laundering scheme or terrorism links.
The circular said that banks are required to obtain the Bank Verification Number (BVN) of all directors and owners of crypto firms that use their services if they wish to facilitate transactions for them. It is also still illegal for banks to hold, purchase or transact digital currencies for their gain, and taking out funds from specified accounts is prohibited.
Crypto businesses, on the other hand, must obtain a license from the country’s capital market regulator, the Nigerian Securities Exchange Commission (SEC). The companies must submit a white paper to the SEC and wait 30 days to find out if they get approval to launch crypto tokens in Nigeria.
Additionally, virtual assets providers like crypto exchanges must have at least $553,000 in capital and be registered with the Corporate Affairs Commission according to the rule issued by SEC in early May last year.
The response to the ban lifting was generally positive, with numerous cryptocurrency firms now actively pursuing licenses to establish legal operations in Nigeria. Capitalizing on this opportunity, certain companies have initiated promotional campaigns to widen their customer base. They also said that the decision would help protect customers greatly.
“Things are going to be more transparent. People are going to gravitate towards licensed platforms, and very importantly, we would have fewer cases of customers losing money,” said Buchi Okoro, the CEO and co-founder of Nigerian crypto platform Quidax.
Nigeria’s growing interest in cryptocurrency
Nigeria continued to be at the forefront of cryptocurrency adoption even when crypto transactions were banned, with Web3 software firm Consensys finding that 99 percent of Nigerians knew about the asset class, and 91 percent were interested in investing.
The country has a rapidly growing population of 223,000,000, 43 percent of whom are under 15 years old. A study by KuCoin found that 35 percent of Nigerians aged 18 to 60 are now involved in buying or selling Bitcoin and other digital currencies.
Chainalysis, a blockchain research firm based in New York, also reported that the cryptocurrency transaction volume in Nigeria increased by nine percent year-over-year. Even among major crypto markets worldwide, the country ranks third in rising crypto transactions, just behind Vietnam and Saudi Arabia.
Nigeria’s growing interest in cryptocurrencies is tied to the two economic crises the country has faced since 2016. High inflation and limited access to regular banking services have led many Nigerians to use unconventional ways of handling money, including cryptocurrencies.