CBN blocks cryptocurrencies transactions in Nigeria

The Central Bank of Nigeria has warned Nigerian banks against having any transactions in cryptocurrencies or facilitating payments for crypto exchanges, instructing the banks to immediately close the accounts of persons or entities transacting in or operating cryptocurrency exchanges.

In a circular dated 5th February 2021 and distributed to regulated financial firms, the CBN further warned the Nigerian Financial Stakeholders that any breach of this directive will attract serious regulatory sanctions.

“Further to earlier regulatory directives on the subject, the Bank hereby wishes to remind regulated institutions that dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited.”

“Accordingly, all DMBs, NBFIs and OFIs are directed to identify persons and/or entities transacting in or operating cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately.”

“Please note that breaches of this directive will attract severe regulatory sanctions. This letter is with immediate effect.”

Recall that the CBN had in 2018 had issued a statement reiterating that cryptocurrencies are not a legal tender and as such are illegal.

In a circular dated February 28th, 2018, and published on its website, the apex bank reiterated that “cryptocurrencies such as Bitcoin, Ripples, Monero, Litecoin, Dogecoin, Onecoin, etc and Exchanges such as NairaEx are not licensed or regulated by the CBN.”

This was the strongest against cryptocurrencies made by the CBN at the time. It also coincided with a bullish run for cryptocurrencies especially when bitcoins rallied to an all-time high of $17,000 at the time.

That same year, the Securities and Exchange Commission (SEC), as well as the Nigerian Stock Exchange (NSE) were all directed by the Senate to enlighten Nigerians on the risks involved in trading with Bitcoins, but this report shows the enlightenment campaign has done little or nothing to dissuade Nigerians.

The central bank has control over the banking sector and by a large extent can use its powers to determine how banks allow customers to use their bank accounts for transactions.

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While cryptocurrencies are a digital form of currency it still relies heavily on the regular currencies for everything from pricing its value to how its ownership is being determined.

The recent directive of the CBN will have clear negative consequences for the international crypto community, taking into consideration Nigeria has the highest interest in Bitcoin globally.

According to a recent report released by Google, Nigeria emerged the first amongst other countries around the world in Bitcoin searches on Google.

If this policy is strictly implemented it will snuff out millions in demand from crypto hungry young Nigerians, taking out a major source of investments for many.