A few months after cracking down on cryptocurrencies, Nigeria has made a major U-turn by lifting the ban on facilitating transactions in crypto assets by financial institutions.
Driving The News
In February 2021, the Central Bank of Nigeria (CBN) issued a directive prohibiting banks and financial institutions from trading or facilitating transactions in crypto assets. The move, citing concerns about money laundering and terrorist financing, caused an uproar in the Nigerian crypto community. However, the ban did not completely suppress crypto trading, which merely shifted to peer-to-peer platforms.
Fast forward to December 2023 and the CBN has announced a revised stance. While acknowledging the risks, the bank acknowledged the growing global trend toward regulating crypto assets rather than banning them. This led to the lifting of the ban on financial institutions providing services to crypto businesses, effectively opening the door for regulated crypto exchanges and wallet providers.
Digging deeper
The immediate impact will be on ease of access and security. With banks now allowed to partner with crypto companies, Nigerians will have more streamlined channels for buying, selling and trading crypto assets. This could potentially boost adoption and bring more legitimacy to the crypto space in Nigeria.
Between the lines
However, it is important to note that this is not a free-for-all. The CBN has already issued licensing requirements for Virtual Component Service Providers (VASPs). These regulations aim to fight financial crime and protect consumers. This means that responsible trading practices and KYC/AML compliance will be key for crypto businesses operating in Nigeria.
What happens next?
While the lifting of the ban is a major step forward, the future of crypto in Nigeria remains unclear. Regulatory clarity will be crucial to fostering a thriving and secure crypto ecosystem. The success of the CBN’s approach will depend on striking a balance between managing risks and promoting innovation.
For Nigerians, the opportunity to more openly engage in crypto assets is undoubtedly welcome. Increased access and potential financial inclusion are among the potential benefits.
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