After almost two years of a comprehensive ban prohibiting local banks from engaging with digital currencies, the Central Bank of Nigeria (CBN) has lifted the given restrictions, allowing lenders to open accounts for crypto firms.
Nigeria’s Central Bank (CBN) has removed a two-year restriction for local financial institutions on cryptocurrency transactions, allowing banks to engage with digital currency operators while introducing stringent customer KYC and anti-money laundering checks.
In a circular sent to banks on Dec. 22, the CBN admitted that the stringent restrictions imposed on Nigerian financial institutions in 2021 don’t meet the increasing global demand and adoption of crypto.
Moreover, the Nigerian population is one of the most active crypto users in the world, second only to India in terms of crypto adoption globally. Recent findings from the global Web3 perception survey showed that 99% of Nigerians are more aware of Web3 and crypto concepts than people in major Western economies.
Back in 2021, when Nigeria banned all crypto activity, mandating banks to shut down the accounts of individuals or entities engaged in crypto trading, it didn’t influence the rates of crypto adoption within the country (35% at the time), as the CBN discovered that most of the local investors didn’t use domestic accounts. At the same time, the activities of crypto exchanges were negatively affected.
While reversing the previous ban policy, the local regulator recognizes the need for clear guidelines, strict KYC and AML policies, as well as other well-defined standards and requirements for establishing banking relationships with virtual asset service providers (VASPs) in Nigeria.
The statement emphasizes that financial institutions interacting with licensed VASPs must maintain robust risk management policies and refrain from holding, trading or conducting transactions in cryptocurrency using their own accounts.
Nevertheless, alleviated rules give more opportunities to crypto exchanges seeking to expand their activities in the market with such a crypto-savvy population. Today, Nigeria’s cryptocurrency usage remains the highest in Africa, displaying a year-on-year growth rate of 9%, according to a recent report from Chainalysis.
