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- 1 The SEC has indicated that it is necessary to contain crypto and digital assets in the financial institutions of the country, looking at present trends.
- 2 The circular emphasized all the changes that will be executed and how they will influence financial institutions.
Previously in 2021, the Central Bank of Nigeria imposed a complete restriction on the trade or investment in crypto assets. However, amid the rapid rise in global interest in and adoption of crypto, CBN is forced to alter its decision. Fast forward to 2024, it is expected the ban will be removed and trade and invest in crypto will be legalized.
What Changed?
The Central Bank of Nigeria has modified its restriction on local banks and financial organizations on the use of cryptos and crypto assets. It is one of the quickest adopters of digital assets in the world.
Last week, CBN announced that it would cancel the directive that was released in February 2021 against institutions that were facilitating cryptocurrency transactions.
In 2021, the central bank made it transparent that the restrictions were not meant to completely forbid crypto trading in the country. So, the adoption resumed, with customers switching to peer-to-peer trading.
Now, the current change will fasten the process of adoption. It will provide service providers and users with the ability to open bank accounts, which would speed up the adoption process. It includes high-profile players such as pan-African exchange Yellow Card.
In May 2023, the Securities and Exchange Commission of Nigeria issued regulations that were created to find a central way between the total ban and the unregulated use of crypto assets and cryptocurrencies.
The exchange announced that it will apply for a crypto license in Nigeria as per the frameworks announced in May 2023.
Yellow Card expects an increase in user adoption and user engagement in the near future. Lasbery Oludimu, chief data protection officer of Yellow Card, shared these expectations in a conversation with local news channels.
The Need for Regulations
After the release of a circular dated December 22, 2023, CBN still believes that there is a need to regulate virtual asset service providers (VASPs), which includes cryptocurrencies and crypto assets.
In its recent circular, the Central Bank of Nigeria presented guidelines for banks and financial institutions about the opening of accounts, designated settlement accounts, settlement services, and acting as channels for foreign exchange inflows and trade for firms transacting in crypto assets.
The guidelines also highlighted the necessity for VASPs to create licensing from the SEC of Nigeria to get involved in the crypto space.
With this announcement, Nigeria has experienced a rise in the adoption of cryptocurrency, especially among its young and tech-savvy citizens. Individuals have turned to P2P trading platforms, shifting from traditional financial services.
What Next?
The Central Bank Circular has all the components of the regulation on what will be executed, what will be permitted, what not, and the procedure. The circular is yet to be publicized on the authorized website of the Central Bank of Nigeria (CBN).
The publication of the complete circular will make it more clear for the users and will improve the process.
The Nigerian SEC said that it will promote investment in sensible digital assets offering investment protection. It will simultaneously look into blockchain technology to drive virtual and traditional investment products.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
