Nigeria Embraces Crypto: Central Bank Lifts Ban on Bank Transactions

A New Era for Cryptocurrency in Nigeria

The Central Bank of Nigeria (CBN) has made a significant shift in its stance on cryptocurrencies. On December 22, a circular revealed that Nigerian banks are now permitted to facilitate cryptocurrency transactions. This move marks a pivotal change from the previous ban, which had significantly impacted the crypto landscape in Nigeria.

Peer-to-Peer Trades Thrived Under Ban

Initially, the CBN's ban aimed to curb Bitcoin and cryptocurrency usage within the country. Contrary to expectations, this restriction led to the rise of peer-to-peer (P2P) merchants. These traders became the primary channel for crypto transactions, circumventing the banking system's constraints.

Industry Stakeholders React to the Change

Cointelegraph reached out to local crypto ecosystem stakeholders to gauge reactions to this development. Nathaniel Luz, the co-founder and CMO of Flincap, shared his insights. He views the lifting of the ban as a significant boost for the industry. According to Luz, this change signals Nigeria's readiness to host and support cryptocurrency businesses.

Institutional Exchanges vs P2P Platforms

Luz highlighted the likely impact on institutional exchanges and P2P platforms. He pointed out that institutional exchanges, which were absent during the ban, now face the challenge of re-establishing their presence. During the ban, P2P trading saw an exponential increase, overshadowing other crypto businesses.

Registration Requirements: A Challenge or Benefit?

Discussing the registration requirements with the Securities and Exchange Commission (SEC), Luz acknowledged the challenges for startups seeking SEC licenses. However, he remains optimistic, believing that such regulations will ultimately benefit the sector.

Banking Sector Evolution: A Historical Perspective

Luz drew parallels with changes in the Nigerian banking sector back in 2010. The recapitalization policy then led to mergers and acquisitions, resulting in a more robust banking industry. He implies that similar positive transformations could occur in the crypto sector with the current policy shift.

CBN's Change of Heart

In a historical context, Cointelegraph reported in February 2021 about the CBN's ban on financial institutions dealing with crypto exchanges. The recent circular, however, acknowledges the growing global demand and adoption of cryptocurrencies, deeming it impractical to continue the stringent restrictions.

While this policy reversal by the Central Bank of Nigeria opens new doors for the crypto industry, it also brings into question the stability and consistency of regulatory approaches in the Nigerian financial landscape.