- In December 2023, CBN removed the two-year restrictions on crypto transactions.
- According to the rules, crypto providers can open bank accounts and link their crypto assets and wallets but not withdraw.
- The 2021 crypto ban on Nigeria adversely affected its foreign investment strategy.
Amid the crypto sphere, three issues have consistently plagued the industry: high volatility, blockchain security issues, and vague crypto laws. For years, blockchain developers, security experts, and regulatory bodies have consistently struggled to find solutions, but to no avail. The latter has been one of the main reasons governments worldwide have had a rough time adopting digital currency.
Its high volatility and decentralized nature forgo standard regulatory mechanisms, forcing the government to develop entirely new policies from scratch. Unfortunately, the complexity of this procedure has proven to be a bit too much, resulting in most governments banning the entire concept of cryptocurrency. For instance, in Africa, a majority of nations initially banned the idea of cryptocurrency. Even Nigeria’s crypto laws, Africa’s leading nation in trading volume, banned the use of cryptocurrency in banks.
Fortunately, over the years, the persistence and success of the ecosystems have resulted in many positive changes. Recently, the Central Bank of Nigeria lifted its 2021 crypto ban to usher in a new age of prosperity for digital assets. However, despite groundbreaking developments, CBN has clarified it will place strict rules on banks despite lifting the ban. This recent announcement has changed Nigeria’s crypto laws, as many question whether this new ban will truly change things.
CBN changes Nigeria’s crypto laws, lifting the ban
Amid Africa’s crypto sphere, several nations have pioneered its progress over the years. Nigeria has the highest crypto trading volume and is one of Africa’s most progressive digital asset ecosystems. For instance, Nigeria hots Africa’s largest crypto exchange, Flutterwave, and hosts most blockchain-based startups in Africa.
Unfortunately, the success of Nigeria’s crypto ecosystem soon became a threat to its fiat currency. Most Nigerians turned to alternative currency, and cryptocurrency presented an opportunity for better pay than standard jobs. This soon prompted the Central Bank of Nigeria to ban the use of cryptocurrency in banks. However, this did not deter the nation’s traders from pursuing digital currency, and it continued to grow despite the 2022 crypto crash.
The sheer power, influence, and potential of cryptocurrency soon influenced CBN to rethink Nigeria’s crypto laws. In December 2023, CBN removed the two-year restrictions on crypto transactions. The positive outlook on Nigeria’s crypto regulations is anticipated as the nations showcased a change in direction after blockchain startups became a rising trend within the nations. Buchi Okoro, CEO and Co-founder of Quidax commented, “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.“
According to the Central Bank of Nigeria, the new crypto regulations stipulate that banks must obtain the bank verification number of all directors and owners of crypto businesses requiring their services. Furthermore, the new Nigerian crypto law mandates that all crypto companies must secure a license from the country’s capital markets regulator, the SEC.
Before these new changes, the SEC specified several factors for the Nigerian Crypto laws on offering and collecting digital assets. As per the guidelines, virtual assets service providers (VASPs) such as crypto exchanges must have at least ₦500 million ($553,000) in capital and be registered with the CAC.
Strict Rules are set for Banks in the new crypto regulations.
Unfortunately, despite the new changes, the CBN has still maintained a strict hold over Nigeria’s crypto laws.
Despite lifting the ban, Nigeria still lacks standard guidelines to integrate other factors, such as tax, into its crypto ecosystem. As a result, CBN has released several rules regaining the new crypto laws. According to the rules, crypto providers can open bank accounts and link their crypto assets and wallets but not withdraw. In addition, banks are still prohibited from holding or trading cryptocurrencies themselves. In an attempt to boo the use of its fiat and CBDC, only Nariba-based accounts will be permitted to transact.
Unfortunately, these guidelines showcase the difficulty surrounding the creation of crypto regulations. CBN has clarified that Niegria’s Crypto laws showcase a clear use of third-party checks to monitor and safeguard crypto accounts.
The crypto ecosystem is gearing for its highest bull run in 2024, and major players have ventured into the industry. The Central Bank of Nigeria has noticed this trend and seeks to set the groundwork for Nigeria’s crypto laws. They said, “Current trends globally have shown that there is a need to regulate the activities of virtual assets service providers, which include cryptocurrencies and crypto assets.”
The 2021 crypto ban on Nigeria adversely affected its foreign investment strategy. Alone, Nigeria presented one of the best crypto ecosystems in Africa, rivalled only by Kenya and South Africa. The ban created a phenomenon forcing many financial institutes from servicing crypto exchanges, yet Nigeria has one of the highest numbers of African crypto exchanges.
Despite the sections placed on the new crypto regulations, it sets the stage for positive change for the regions. Many analysts and crypto-experts have estimated that the reductions will gradually improve as the year progresses. The restriction hints at a concern that a disproportionate number of foreign exchanges will dominate the Nigerian market. If CBN seeks to promote its crypto journey, it will create crypto regulations that allow its region to benefit from its local talent and exchanges.