The Central Bank of Nigeria (CBN) has issued a circular directing financial institutions in the country against dealing with cryptocurrencies or providing services to cryptocurrency exchanges.
The circular dated February 5, 2021, clearly states that all deposit money banks (DMBs), Non-Financial Institutions (NBFIs), and Other Financial Institutions (OFI) must identify their customers who deal with cryptocurrency and close their accounts immediately.
Banks that fail to comply with the directive will “attract severe regulatory sanctions,” the circular warns.
The latest directive would represent a tougher stance on cryptocurrencies than an earlier 2017 circular from CBN, where it warned financial institutions that chose to serve crypto clients that they did so at their own risk.
It also comes as a surprise given the Nigerian Securities and Exchange Commission (SEC) had promised to publish further guidance on how the country will regulate cryptocurrency.
Is the CBN Ban on Crypto Already in Effect?
With the apex bank circular dated with immediate effect, Nigerian cryptocurrency holders already report issues withdrawing funds from exchanges, with the said banks declining to process the transactions. Some banks are also reportedly threatening to ‘flag’ or close customer bank accounts if they do not stop using it to move funds to and from crypto exchanges.
My bank called me threatening to flag my account if I use it to transact further with crypto exchanges.
— Futurist (@nathaniel_luz) February 5, 2021
Nigeria is unarguably Africa’s largest bitcoin market, according to several metrics. On Binance alone, the BTC/NGN pair recorded an 11 billion naira ($28.8 million) volume in the last 24 hours, with the peer-to-peer platform, Paxful recording an average $2.8 million daily volume.
The Nigerian crypto market’s rapid growth has largely been buoyed by the nation’s restrictive financial system and inflationary currency that has dipped by over 30% against the dollar amid the coronavirus pandemic.
Until now, users can easily buy cryptocurrency via debit cards or bank transfer on cryptocurrency exchanges and also convert crypto to Naira seamlessly. However, the ban will introduce new restrictions that the burgeoning market will take a while to get to grip with.
Worth noting is that Nigeria’s central bank is now walking the same path as the Reserve Bank of India (RBI) which issued a similar circular to local banks in 2017. Last year, the prohibition was ruled unjust by the Indian supreme court, paving the way for cryptocurrency businesses to start flourishing.
Update: This article has been updated to include an official confirmation by the CBN on its website. An earlier version noted that Coinfomania was awaiting an update from the financial institution.