The Central Bank of Nigeria (CBN) has reversed its ban on dealing with companies involved in digital tokens.
According to a report by BusinessDay, the CBN has now instructed lenders to open accounts for crypto firms, marking a reversal of the ban it imposed in 2021.
The decision comes as the Securities and Exchange Commission (SEC) issued new regulations for crypto companies operating in the country.
The CBN’s ban, introduced in February 2021, prohibited deposit-taking financial institutions from transacting with or operating cryptocurrency exchanges.
However, the recent change in law will provide a much-needed boost to crypto exchanges in Nigeria, which ranks second in blockchain data company Chainalysis Inc.’s adoption index.
Despite the volatility of virtual asset prices, cryptocurrency transactions in Nigeria have continued to grow, with a 9 percent increase reported by Chainalysis in September.
Crypto Companies Need to Obtain License
Under the new regulations, Nigerian banks are now permitted to open bank accounts for crypto companies, also known as Virtual Asset Service Providers (VASPs).
They can provide designated settlement accounts and act as channels for foreign exchange flows and trade.
However, crypto companies must obtain a license from the SEC to operate and meet certain requirements.
VASPs, including crypto exchanges, are obligated to pay a minimum paid-up capital of ₦500 million ($553,000) and must be duly registered with the Corporate Affairs Commission (CAC).
Additionally, companies wishing to issue tokens must submit a white paper to the SEC and await approval before launching them in Nigeria.
To ensure compliance, banks are required to obtain the Bank Verification Number (BVN) of all directors and owners of the crypto companies they serve.
The guidelines also include stringent Know Your Customer (KYC) measures that VASPs must adhere to before establishing a banking relationship.
The change in crypto policy comes as Nigeria’s currency has experienced significant devaluation this year, prompting residents to turn to cryptocurrencies as an alternative store of value.
With the reopening of banking channels, Nigeria’s crypto industry is poised for further growth.
Back in October, a group of Nigerian blockchain experts criticized the nation’s Central Bank for its decision to prohibit the use of cryptocurrencies in 2021.
At the time, Adedeji Owonibi the CEO of Convexity praised the regime around blockchain technology and fired shots at the failure of the Central Bank of Nigeria (CBN) to implement a favorable policy.
He hailed the recent steps by the National Information Technology Development Agency (NITDA) in its role in pushing for the first National Blockchain Policy in May, a move that would protect creators, investors , and users.
Similarly, other experts at the summit stressed the regulatory hurdles faced in several jurisdictions and cited a lack of proper understanding of the concept and nature of the technology as key factors for the CBN ban two years ago.