Nigeria has eased its stringent stance on cryptocurrency transactions, introducing guidelines to govern operations after two years.



The Central Bank of Nigeria (CBN) recently released comprehensive guidelines to govern the operations of bank accounts for Virtual Assets Service Providers (VASPs), signaling the end of a two-year ban on cryptocurrency transactions. This information is detailed in a circular titled Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers, issued by Haruna B. Mustafa, Director of the Financial Policy and Regulation Department at the CBN.



While the ban lasted, Nigerians defied the odds with the volume of crypto transactions in Nigeria growing 9% year-over-year to $56.7 billion between July 2022 and June 2023, according to New York-based blockchain research firm Chainalysis in a September report. Nigeria is also reported to have the highest peer-to-peer (P2P) exchange volume, according to the 2023 Geography of Cryptocurrency Report. A recent study from KuCoin found that 35% of Nigerians aged between 18 and 60 are investing or trading bitcoin or other cryptocurrencies.



In February 2021, the CBN initially imposed restrictions on banks and financial institutions, preventing them from engaging with cryptocurrency service providers reportedly due to concerns related to money laundering and terrorism financing risks.



In the latest circular, the CBN acknowledges global trends indicating the need to regulate the activities of VASPs, including cryptocurrencies and crypto assets. &#8220;Following this development, the Financial Action Task Force (FATF) in 2018 also updated its Recommendation 15 to require VASPS to be regulated to prevent misuse of virtual assets for ML/TF/PF.&#8221;



&#8220;Furthermore, Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022 recognizes VASPs as part of the definition of a financial institution. In addition, the Securities and Exchange Commission (SEC) in May 2022 issued Rules on Issuance, Offering and Custody of Digital Assets and VASPS to provide a regulatory framework for their operations in Nigeria,&#8221; adds the CBN.



In response to these developments, the CBN explained that it issued the new guidelines to provide clear directives to financial institutions under its regulatory purview regarding their banking relationships with VASPs in Nigeria.



The guidelines supersede previous circulars. However, it emphasizes that &#8220;banks and other financial institutions are still prohibited from holding, trading, and/or transacting in virtual currencies on their own account&#8221;.



The directive concludes with a firm call to action, stating, &#8220;Accordingly, all banks and other financial institutions are hereby required to immediately comply with the provisions of the Guidelines.&#8221;



Nigerian analyst, Kolawole Oyebola, expresses his views on the CBN&#8217;s decision, highlighting the positive implications for the burgeoning cryptocurrency market in the country. Oyebola commends the regulatory clarity provided by the comprehensive guidelines, stating that it will instill confidence among investors and industry players.



&#8220;This move by the CBN is a welcomed and long-awaited step in the right direction. The comprehensive guidelines not only signal a pragmatic approach to regulating the cryptocurrency space but also demonstrate the recognition of the importance of digital assets in the evolving global financial landscape,&#8221; Oyebola tells FORBES AFRICA.



The CBN&#8217;s ban, during its implementation period, had raised concerns within the cryptocurrency community and sparked debates about the future of digital currencies in Nigeria. Analysts had been vocal about the need for a balanced regulatory framework that encourages innovation while addressing potential risks associated with cryptocurrencies.



&#8220;Now that the ban has been lifted, we can anticipate increased interest and participation in the cryptocurrency market. The guidelines provide a roadmap for both VASPs and investors, promoting transparency and accountability,&#8221; Oyebola adds.



Already, pan-African cryptocurrency trading platform, Yellow Card, is exploring opportunities to capitalize on its first-mover advantage by pursuing licensing.



While Oyebola opines that challenges may persist, noting the need for continuous dialogue between regulators and industry stakeholders, he remains optimistic about the future of cryptocurrency in Nigeria.



&#8220;The CBN&#8217;s decision to lift the ban and introduce comprehensive guidelines reflects a proactive stance that could pave the way for a more robust and inclusive digital financial ecosystem in the country.&#8221;

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Nigeria Resumes Cryptocurrency Transactions With New Guidelines For VASPs

Analysts express concerns over the second postponement of the Central Bank of Nigeria&#8217;s (CBN) Monetary Policy Committee (MPC) meeting, crucial for interest rates, leading to uncertainties in the market.



While investors began the week on a negative note, resulting in a 0.15% decrease in Nigeria&#8217;s equities market, it closed with a 0.07% gain on Thursday. This was propelled by bargain activities in small to mid-cap stocks.



On Monday, Stanbic IBTC Holdings, CWG, and Caverton Offshore Support Group witnessed profit-taking, leading to share price declines. Stanbic IBTC Holdings saw a 7.08% drop, CWG lost 3.14%, and Caverton was down by 2.78%. However, on Thursday, Beta Glass led market advancers, rising by 10%, while Multiverse, Mecure Industries, and Nigerian Enamelware also experienced significant gains.



At the close of Thursday&#8217;s session, the Nigerian Exchange Limited (NGX)-All-Share Index (ASI) increased to 71,052.85 points from 71,008.7 recorded on Monday. Market capitalization reached ₦39.074 trillion ($40.85 billion), bringing the year’s return to 38.63% from 38.55%. In 6,579 deals, investors exchanged 563,707,721 shares worth ₦3.442 billion ($3.59 million).



“For this week, we expect a couple of factors to impact investors’ sentiment. Specifically, we anticipate a downturn in market momentum driven by concerns around the inconsistency of the Monetary Policy Committee (MPC), [as it further postponed its next meeting scheduled to hold during the week].



“Also, we foresee profit-taking activities across tickers that have realized significant gains. However, we do not rule out the possibility of bargain-hunting activities during the week as investors strategically take positions on stocks with attractive entry points.



“Overall, we expect the market to trade on a mixed note with a prevailing bearish sentiment. Thus, we expect the NGX-ASI to close in the red zone this week,” Meristem research analysts reportedly said in their stock recommendation for Monday.



The devaluation of the Naira in June has had a significant impact on Nigerian businesses, particularly foreign-owned subsidiaries trading on the Nigerian Exchange.



Companies with foreign parent groups, importing a substantial portion of their inventories, experienced unrealized FX losses due to the devaluation.



The MPC of the Central Bank of Nigeria (CBN) has twice postponed its 293rd meeting, initially set for September 25 and 26, since the nomination of the new governor, Yemi Cardoso, in the same month.



The meeting, intended to address various issues, including the decision on interest rates, was rescheduled for the second time on Monday, shifting to an unspecified date. This meeting would have signified the inaugural rates meeting under Cardoso. While acting as CBN governor from June to September, Folashodun Shonubi oversaw two interest rate increases at the bank.



With the enactment of the new CBN Act (2007) by the National Assembly, the reconstituted MPC &#8220;meets bi-monthly, except in the event of an emergency&#8221;. The two-day meeting occurred in January, March, May, and July 24 and 25. According to the Act, the meeting was supposed to take place in September and November, raising concerns about efforts to stabilize the nation&#8217;s currency, which has plummeted about 42% this year, contributing to inflation which worsened in October.



Nigerian analyst Kolawole Oyebola weighs in on the situation, attributing the negative sentiment to global economic concerns and regional factors impacting investor confidence.



Oyebola notes that the early-week downturn was a reflection of the cautious approach adopted by investors amid geopolitical tensions and fluctuating commodity prices. &#8220;The market experienced a slight dip on Monday as investors reacted to external pressures, exhibiting a typical risk-averse behavior,&#8221; Oyebola tells FORBES AFRICA.



&#8220;The mid-week recovery suggests that investors reevaluated their positions, with a focus on the underlying strength of the Nigerian economy,&#8221; Oyebola explains. He highlights positive indicators, including increased trading volumes and strategic investments in key sectors.



While uncertainties persist, Oyebola expresses optimism about the market&#8217;s ability to navigate challenges. &#8220;Investors are becoming more discerning, and we&#8217;re witnessing a more mature approach to risk management,&#8221; he remarks.



The analyst urges stakeholders to closely monitor global economic developments, emphasizing the interconnected nature of financial markets. &#8220;I encourage investors to adopt a balanced and informed strategy to navigate the evolving landscape.&#8221;

Tag: CBN

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Nigeria Resumes Cryptocurrency Transactions With New Guidelines For VASPs

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