Nigeria’s central bank has lifted its restrictions on virtual assets service providers (VASPs), allowing them to operate bank accounts and offer services to customers who deal in cryptocurrencies.
The Central Bank of Nigeria (CBN) issued a circular on Friday, stating that banks are now permitted to open accounts for VASPs, subject to meeting certain requirements and obtaining prior approval from the CBN.
However, the circular also stated that banks are still prohibited from holding, trading, or transacting in virtual currencies on their accounts, and must ensure that VASPs comply with the relevant laws and regulations on anti-money laundering, terrorism financing, and tax evasion.
The CBN imposed a ban on banks providing accounts for crypto exchanges and individuals exposed to cryptocurrencies in February 2021, citing the risks of fraud, money laundering, and volatility. The ban sparked outrage and criticism from the crypto community, as well as legal challenges from some affected parties.
The CBN’s reversal of the ban comes amid growing global recognition and adoption of cryptocurrencies, especially in Africa, where many people use them as a means of payment, remittance, and investment.
According to a report by Chainalysis, a blockchain research firm, Africa’s cryptocurrency market grew by over 1,200% in terms of value received between July 2020 and June 2021, making it the fastest-growing region in the world. Nigeria ranked third globally in terms of crypto adoption, behind Vietnam and India, according to the 2021 Global Crypto Adoption Index by Chainalysis.
The report also noted that Africa has the highest share of retail-sized transfers, indicating that more people are using cryptocurrencies for everyday transactions and savings, rather than for speculation or trading.
The CBN’s new guidelines for VASPs are seen as a positive step towards regulating and legitimizing the crypto industry in Nigeria, which has the potential to boost financial inclusion, innovation, and economic growth.
A crypto exchange operator who spoke to BusinessDay said the new circular is a signal for “good times ahead” for the crypto industry in Nigeria, and expressed optimism that the CBN will collaborate with stakeholders to create a conducive environment for crypto businesses and users.
The CBN’s move also aligns with the recent developments in other African countries, such as Ghana, Kenya, and South Africa, that are exploring ways to regulate and embrace cryptocurrencies.
The CBN said it will continue to monitor the developments in the crypto space and provide further guidance as necessary.
Source: BusinessDay
