Nigerian Banks Ordered to Close Cryptocurrency Accounts

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The Central Bank of Nigeria (CBN) released a circular on February 5, 2020 ordering banks and other financial institutions to stop facilitating transactions for cryptocurrency exchanges in Nigeria. The circular also orders banks to close the accounts of any persons or entities found making any cryptocurrency transaction or operating a cryptocurrency exchange. Failure to comply with the directive will result in severe regulatory sanctions.

The Central Bank of Nigeria has suspended international money transfers to mobile wallets in Nigeria. This is because of a new regulation that only allows US dollar payout for remittances in the country. The suspension will improve visibility of US dollar remittance flows.

The CBN reminded regulated banking institutions that dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited and all banks should identify persons and/or entities transacting with cryptocurrency or operating crypto exchanges on their platforms and ensure that such accounts are closed immediately. A 2017 directive stated that Bitcoin and other cryptocurrencies are not legal tender in Nigeria.

In November 2020, the CBN issued a remittance policy to allow recipients of money transfer in the country to receive the funds in US dollars. On December 16, 2020, the bank suspended mobile money remittances to Nigeria.

The directive is likely to affect crypto remittances, which are increasingly becoming popular because their speed, efficiency, and low cost. There is a growing number of startups offering crypto-based money transfers and payments to Nigeria. Leading crypto-based remittances startups include Cryptofully, Bitsika, Sendcash, and BitPesa.

On February 8, 2021, the central bank issued a statement to justify its directive.

For those who are not conversant with the universe of cryptocurrencies, it is important to state that Cryptocurrencies are digital or virtual currencies issued by largely anonymous entities and secured by cryptography. Cryptography is a method of encrypting and hiding codes that prevent oversight, accountability, and regulation.

The statement further stated:

As regards our recent policy pronouncement, it is important to clarify that the CBN circular of February 5, 2021 did not place any new restrictions on cryptocurrencies, given that all banks in the country had earlier been forbidden, through CBN’s circular dated January 12, 2017, not to use, hold, trade and/or transact in cryptocurrencies . Indeed, this position was reiterated in another CBN Press Release dated February 27, 2018.

However, in September 2020, Nigeria’s Security and Exchange Commission acknowledged that virtual currencies are financial assets. The Statement On Digital Assets And Their Classification And Treatment said, “The position of the Commission is that virtual crypto assets are securities, unless proven otherwise.”

UPDATE
The Nigerian Senate has summoned the Governor of Central Bank and Securities Exchange Commission to brief committees on Banking, Insurance and Other Financial Institutions; ICT and Cybercrime; and Capital Market on the opportunities and threats of the Cryptocurrency on the nation’s economy and security and to report their findings within two weeks.

Some Senators have also weighed in on the Nigeria’s crypto ban on Twitter.