Nigeria’s Central Bank Lifts Cryptocurrency Transaction Restrictions: Introduces stringent customer checks

Nigeria’s Central Bank has recently reversed the two-year prohibition on cryptocurrency transactions, marking a significant shift towards a more favorable stance on digital assets. The initial restriction in 2021 was attributed to concerns related to money laundering and terrorism financing. In its latest move, the Central Bank of Nigeria (CBN) has not only reversed the ban but has also introduced stringent Know Your Customer (KYC) and anti-money laundering checks for customers engaging in cryptocurrency transactions. The regulatory authority has issued updated guidelines to financial institutions to govern the conduct of crypto transactions.

Buchi Okoro, CEO and co-founder of Quidax, a Nigerian crypto platform, expresses optimism about the new developments. “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,” Okoro affirms.

Key Guidelines:

1. Bank Verification Number (BVN) Requirement:

• Banks must now obtain the BVN of all directors and owners of crypto businesses using their services.

2. License Mandate from SEC:

• Cryptocurrency companies are mandated to secure a license from the Securities Exchange Commission (SEC), the country’s capital markets regulator. This requirement aligns with the SEC’s rules issued in May 2022 concerning the offering and collection of digital assets.

3. Capital and Registration for Crypto Exchanges:

• Virtual assets service providers (VASPs), including crypto exchanges, must possess a minimum capital of ₦500 million ($553,000) and be registered with the Corporate Affairs Commission (CAC).

4. Token Issuance Regulations:

• Crypto companies intending to issue tokens must submit a white paper to the SEC and wait for a 30-day period for approval before releasing tokens in Nigeria.

5. Restrictions on Banks:

• Despite the positive changes, banks are still prohibited from holding, trading, and transacting in virtual currencies directly through their accounts. This restriction aims to address the inherent volatility of crypto funds and safeguard customer funds.

The CBN asserts that its revised guidelines adhere to global standards for regulating cryptocurrency usage within the country. While acknowledging that the guidelines are not flawless, Okoro emphasizes the need for certain measures to instill confidence in the industry.

Nigeria’s Central Bank’s decision to lift the cryptocurrency transaction restrictions reflects a strategic move towards transparency and heightened regulatory oversight. The new guidelines aim to strike a balance between fostering the growth of the crypto industry and safeguarding the interests of customers and financial institutions.