- December 24, 2023
- Posted by: [email protected]
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The Central Bank of Nigeria (CBN) has lifted its ban on dealing with companies involved in digital tokens, instructing lenders to open accounts for crypto firms, according to a report by BusinessDay. This marks a significant reversal of the ban imposed by the CBN in February 2021. The decision comes in the wake of new regulations issued by the Securities and Exchange Commission (SEC) for crypto companies operating in the country.
The CBN’s initial ban prohibited deposit-taking financial institutions from transacting with or operating cryptocurrency exchanges. However, the recent change in law is expected to provide a much-needed boost to crypto exchanges in Nigeria, which ranks second in Chainalysis Inc.’s adoption index.
Despite the volatility of virtual asset prices, cryptocurrency transactions in Nigeria have continued to grow, with Chainalysis reporting a 9 percent increase in September. Under the new regulations, Nigerian banks are now authorized to open bank accounts for crypto companies, also known as virtual asset service providers (VASPs). These banks can provide designated settlement accounts and serve as channels for foreign exchange flows and trade.
To operate, however, crypto businesses must seek a license from the SEC and meet specific requirements. VASPs, including crypto exchanges, are required to pay a minimum paid-up capital of ₦500 million ($553,000) and must be duly registered with the Corporate Affairs Commission (CAC). Additionally, companies wishing to issue tokens must submit a white paper to the SEC and await approval before launching them in Nigeria.
To ensure compliance, banks are obligated to obtain the bank verification number (BVN) of all directors and owners of the crypto companies they serve. The guidelines also include stringent Know Your Customer (KYC) measures that VASPs must adhere to before establishing a banking relationship.
This shift in crypto policy aligns with Nigeria’s currency experiencing a significant devaluation this year, prompting residents to turn to cryptocurrencies as an alternative store of value. With the reopening of banking channels, Nigeria’s crypto industry is poised for further growth.
Nigerian blockchain experts criticized the CBN for its 2021 decision to prohibit the use of cryptocurrencies. Adedeji Owonibi, the CEO of Convexity, praised the recent steps taken by the National Information Technology Development Agency (NITDA) in pushing for the first national blockchain policy in May. This move aims to protect creators, investors, and users in the blockchain space. Other experts at the summit highlighted regulatory hurdles in various jurisdictions and cited a lack of proper understanding of the technology’s concept and nature as key factors in the CBN’s ban two years ago.
