Nigeria’s central bank, the Central Bank of Nigeria (CBN), recently issued a circular to banks in the nation. The bank has warned of severe consequences for Deposit Money Banks (BMBs) and other regulated financial firms if they deal in crypto. In the circular, financial institutions have been told to shut down the accounts of anyone dealing in crypto trading.
Nigerians And Crypto
Crypto has become a popular form of transacting in Nigeria. The reason for this can largely be traced to the collapse of the nation’s national currency, which has been hit with severe inflation. Consequently, many Nigerians have turned to crypto as a way to protect their wealth. However, it has never gone down well with the nation’s central bank.
On January 12, 2017, the central bank issued a circular, which warned banks that crypto trading was mostly associated with money laundering and terror financing. Banks were instructed not to offer their services to those dealing in the crypto trading sector. A year later, the CBN issued a circular on February 28, 2018. In the circular, the bank said that crypto was not recognized as legal tender in the nation. Consequently, those dealing in crypto did not enjoy legal protection.
Despite the numerous warnings, crypto trading in Nigeria has continued. The data shows that there has been an uptick in the use of Bitcoin in the nation. Besides being used to facilitate international trade, Bitcoin has also proven to be a lifesaver for many Nigerians. During the October 2020 protests that rocked the nation, many activists were barred from using the nation’s monetary system. Consequently, many turned to Bitcoin transactions, which allowed them to skirt financial restrictions.
What The Circular Said
According to a statement by the Director of Banking Supervision, Bello Hasan, and the Director of Payments System Management Department, Musa Jimoh, the central bank was reminding regulated financial firms that facilitating crypto trading was prohibited.
The statement added that
“Accordingly, all DMBs, NBFIs and OFIs are directed to identify persons and/or entities transacting in or operating crypto currency exchanges within their systems and ensure that such accounts are closed immediately.” Those who flaunt the directive will face severe sanctions.
Will The Ban Be Effective?
Nigeria today accounts for some of the largest volumes in Bitcoin transactions globally. The nation has a large tech-savvy population that has a major interest in crypto trading. Due to the decentralized nature of crypto transactions, it is highly unlikely that the crypto ban will be effective.
Instead, the likely outcome of the move will be to force crypto trading underground. It will only make it harder for the central bank to monitor crypto transactions since many traders will take steps to obscure their transactions. There is a major incentive to use crypto in the nation due to the hyperinflation and an attempted ban on crypto is not enough to deter Nigeria crypto traders. Today, Nigerians even use Bitcoin for international trade to avoid limitations imposed by the nation’s authorities.
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