Nigerian Central Bank Reverses Bitcoin Ban
The Central Bank of Nigeria has issued a circular reversing its ban on bitcoin and introducing new guidelines for Virtual Asset Service Providers (VASPs) in the country. This move is seen as a positive step towards providing better regulatory clarity and promoting the use of bitcoin and stablecoins in the daily lives of Nigerians and the Nigerian economy as a whole.
The Infamous 2021 CBN Circular
In February 2021, the Central Bank of Nigeria issued a circular that prohibited Nigerian banks from directly tying bank accounts to crypto transactions. This resulted in businesses having to adapt to the new regulations, with some even shutting down. However, one consequence of this circular was the growth of Nigeria’s peer-to-peer crypto market, which is now dominant globally.
The CBN’s New Regulation and Guidelines
In a recent circular, the Central Bank of Nigeria communicated its “Guidelines On Operations of Bank Accounts For Virtual Assets Service Providers (VASPs)”. These guidelines outline permitted activities between banks and VASPs for virtual asset transactions and foreign exchange inflows. However, Nigerian banks and financial institutions are prohibited from holding, trading, and transacting cryptocurrencies for themselves.
Consequences For VASPs and Individuals In 2024
While the new guidelines provide more regulatory clarity for virtual assets, they also introduce stringent KYC (Know Your Customer), AML (Anti-Money Laundering), and other related measures. VASPs operating in Nigeria must obtain a license issued by the Nigerian SEC (Securities and Exchange Commission) to operate bank accounts. There are still questions about the effects of the guidelines on individuals and VASPs, particularly regarding virtual asset trades and transaction limits.
Outlook For 2024
The effects of the Central Bank of Nigeria’s circular are expected to extend beyond the country’s borders and influence regulatory decisions in other countries. These new guidelines will shape the overall market dynamics and have an impact on the FX markets in Nigeria, especially considering the current bitcoin price rally. As Nigerian regulators catch up with global standards, VASPs can expect a more favorable operating environment, leading to increased competition and benefits for end consumers.