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Nigerian Central Bank Relaxes Cryptocurrency Trading Restrictions Amid Global Trends

Jonathan Wong

Jonathan Wong

27 December 2023

In its latest circular, Nigeria's Central Bank announces the removal of the ban on cryptocurrency transactions, emphasizing the need for regulation in response to global trends. The initial ban in February 2021 was driven by concerns about money laundering and terrorism financing, prompting regulatory efforts in the crypto space. The circular, dated December 22, outlines regulations for virtual asset service providers (VASPs) like cryptocurrency entities. However, banks are still prohibited from possessing, trading, or engaging in cryptocurrencies.

Despite restrictions, Nigeria's tech-savvy population has embraced cryptocurrencies, utilizing peer-to-peer trading to bypass traditional banking channels. The New York-based blockchain research firm Chainalysis reported a 9% annual increase in cryptocurrency transactions in Nigeria, reaching $56.7 billion between July 2022 and June 2023.

The circular details how financial institutions should engage with VASPs, emphasizing the necessity of obtaining a license from the Nigerian SEC for cryptocurrency commerce. While the youthful population has shown enthusiasm for cryptocurrencies, banks are still excluded from direct involvement in digital assets.

As Nigeria adapts to global trends, the decision to regulate rather than outright ban cryptocurrency transactions reflects the ongoing challenge of striking a balance between innovation and addressing financial risks associated with digital assets.