Nigeria’s Central Bank (CBN) has reversed its stringent anti-crypto measures, ending a two-year ban on banks handling cryptocurrency transactions. This move aligns with the collaborative efforts of major Nigerian banks to introduce a new stablecoin named cNGN. The CBN attributed its decision to the global interest and adoption of cryptocurrencies, prompting a reassessment of the severe restrictions imposed in 2021.
Revised Guidelines for Crypto Transactions: The CBN has unveiled revised guidelines setting standards and prerequisites for banking relationships and account openings for virtual asset service providers (VASPs). Banks are now required to collect the Bank Verification Number (BVN) of management members of crypto businesses before initiating account setups. Additionally, crypto firms must obtain licensing from the Nigerian Securities and Exchange Commission and register with the country’s Corporate Affairs Commission to gain account access. These guidelines aim to fortify risk management protocols within the banking sector, specifically concerning licensed VASPs’ operations.
Restrictions on Banks’ Crypto Activities: The CBN clarified that financial institutions cannot hold cryptocurrency, trade, or conduct transactions using their own accounts. This underscores a cautious approach to cryptocurrency activities within the traditional banking sector, ensuring compliance with regulatory guidelines.
Collaborative Stablecoin Initiative – cNGN: Major Nigerian banks, including Access Bank, Sterling Bank, Providus, Korapay, First Bank, Interstellar, Interswitch, Budpay, and Convexity, are joining forces to develop the cNGN stablecoin. This stablecoin will be backed by and pegged to the Nigerian naira, providing a decentralized digital alternative. cNGN complements the existing eNaira, Nigeria’s central bank digital currency (CBDC), which has faced challenges in achieving widespread adoption since its launch.
Reasons Behind CBN’s Policy Shift: Experts suggest that the CBN’s decision to lift the ban on banks’ involvement in crypto transactions is driven by a desire to support and facilitate blockchain technology. The regulator acknowledges the need for a financial system that accommodates digital innovations while ensuring adherence to regulatory frameworks.
Nigeria’s Crypto-Friendly Environment: Nigeria has established itself as one of the most crypto-friendly jurisdictions globally, ranking second on Chainalysis’ Global Crypto Adoption Index. Despite economic uncertainties, many Nigerian citizens are exploring cryptocurrencies as financial alternatives, contributing to the country’s leadership in raw transaction volume in the African region.
Conclusion: Nigeria’s decision to lift the crypto ban and the collaborative initiative for a stablecoin demonstrate a willingness to embrace digital financial innovations. The revised guidelines provide a structured framework for crypto transactions, balancing regulatory concerns with the evolving landscape of blockchain technology. The collaboration among major banks for cNGN reflects a proactive approach to exploring decentralized alternatives within the Nigerian financial ecosystem.