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Nigerian Central Bank Lifts February 2021 Crypto Prohibition Order

December 24, 2023 | by stockcoin.net

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The Nigerian Central Bank has lifted its February 2021 crypto prohibition order, which previously barred banks and financial institutions from providing services to crypto entities. This reversal comes as the central bank aligns its guidelines with the Financial Action Task Force’s updated recommendation 15, which emphasizes the regulation of virtual asset service providers. The new guidelines also supersede a previous prohibition order issued in January 2017. While banks and financial institutions are now allowed to service the crypto industry, they are still prohibited from holding, trading, or transacting in virtual currency on their own accounts. Immediate compliance with the new guidelines is expected.

Nigerian Central Bank Lifts February 2021 Crypto Prohibition Order

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Table of Contents

Background Information

Nigerian Central Bank’s previous crypto prohibition order

The Central Bank of Nigeria (CBN) had previously issued a prohibition order on February 5, 2021, which barred banks and financial institutions from providing services to crypto entities. This order led to the closure of many bank accounts linked to cryptocurrencies.

Reasons for the reversal of the prohibition order

The CBN decided to reverse its prohibition order due to several reasons. One of the main reasons was to align Nigeria’s regulations with global trends in the crypto industry. Additionally, the updated recommendation 15 from the Financial Action Task Force (FATF) played a significant role in the reversal. The FATF’s recommendation calls for the regulation of virtual asset service providers (VASPs) to prevent the misuse of virtual assets for money laundering, terrorism financing, and proliferation financing.

Alignment with FATF’s recommendation 15

The Central Bank of Nigeria’s decision to reverse the crypto prohibition order aligns with FATF’s recommendation 15. This recommendation emphasizes the need to regulate VASPs, including cryptocurrencies and crypto assets, to prevent their misuse in illicit activities. By adopting the updated recommendation, Nigeria aims to strengthen its efforts against money laundering, terrorism financing, and proliferation financing.

Overview of the Reversal

Dec. 22 announcement by the Central Bank of Nigeria

On December 22, the Central Bank of Nigeria announced the reversal of its crypto prohibition order. This announcement marked a significant shift in the regulatory stance towards cryptocurrencies in the country.

Rescinding the order that prohibited banks from servicing the crypto industry

With the reversal, the CBN rescinded the previous order that barred banks and financial institutions from providing services to crypto entities. This decision allows banks to once again engage with the crypto industry and offer their services to individuals and businesses involved in cryptocurrencies.

Superseding the Jan. 12, 2017 prohibition

The reversal not only rescinded the February 5, 2021 prohibition order but also superseded the previous prohibition that was issued on January 12, 2017. This indicates a broader shift in the regulatory approach to cryptocurrencies in Nigeria.

Reasons for the Reversal

Aligning Nigeria’s regulations with global trends

The decision to reverse the crypto prohibition order is driven by the desire to align Nigeria’s regulations with global trends in the crypto industry. Many countries around the world are embracing cryptocurrencies and implementing frameworks to regulate their use. Nigeria recognizes the need to keep pace with these developments and create a conducive environment for crypto-related activities.

Citing FATF’s updated recommendation 15

The Central Bank of Nigeria specifically cites FATF’s updated recommendation 15 as a reason for reversing the prohibition order. By adhering to this recommendation, Nigeria aims to ensure that VASPs, including cryptocurrencies and crypto assets, are regulated and subjected to measures that prevent money laundering, terrorism financing, and proliferation financing.

Regulating the activities of virtual asset service providers (VASPs)

The reversal of the prohibition order allows the Central Bank of Nigeria to regulate the activities of virtual asset service providers (VASPs). VASPs are entities that facilitate the exchange, transfer, and storage of cryptocurrencies and play a crucial role in the crypto industry. By regulating VASPs, Nigeria aims to mitigate the risks associated with virtual assets and ensure their responsible use.

Preventing the misuse of virtual assets for ML/TF/PF

One of the key objectives of reversing the prohibition order is to prevent the misuse of virtual assets, such as cryptocurrencies, for money laundering (ML), terrorism financing (TF), and proliferation financing (PF). By implementing regulations and oversight on crypto-related activities, Nigeria aims to enhance its abilities to detect and prevent illicit financial activities involving virtual assets.

Recognition of VASPs

Section of Nigeria’s money laundering laws now recognizes VASPs as part of the definition of a financial institution

The Central Bank of Nigeria highlights that a section of the country’s money laundering laws now recognizes VASPs as part of the definition of a financial institution. This recognition solidifies the role of VASPs in the financial landscape and subjects them to the same regulatory requirements and obligations as other financial institutions.

Regulatory framework provided by the Securities and Exchange Commission

The Securities and Exchange Commission (SEC) has also contributed to the recognition of VASPs by providing a regulatory framework for their operations. This framework ensures that VASPs operate within a legal and regulated environment, fostering transparency and accountability in the crypto industry.

Restrictions on Entities

Entities still barred from holding, trading, or transacting in virtual currency on their own account

Although the crypto prohibition order has been reversed, certain entities are still restricted from holding, trading, or transacting in virtual currency on their own account. The Central Bank of Nigeria emphasizes that these entities must comply with the new guidelines and refrain from engaging in unauthorized crypto-related activities.

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Expectation of immediate compliance with the new guidelines

The Central Bank of Nigeria expects immediate compliance with the new guidelines issued alongside the reversal of the prohibition order. It is crucial for entities involved in crypto-related activities to familiarize themselves with the guidelines and ensure that their operations align with regulatory requirements.

Implications for the Crypto Industry

Re-opening of bank accounts linked to crypto

With the reversal of the prohibition order, bank accounts that were previously closed due to the restrictions on crypto-related activities can now be re-opened. This development provides individuals and businesses involved in cryptocurrencies with improved access to banking services, allowing for smoother operations and increased financial integration.

Improved access to banking services for crypto entities

The reversal of the crypto prohibition order also means that crypto entities, including exchanges and other crypto-related businesses, can now access banking services more easily. This facilitates the growth and development of the crypto industry in Nigeria by providing essential financial infrastructure and support.

Potential increase in cryptocurrency transactions in Nigeria

The reopening of bank accounts and improved access to banking services for crypto entities is likely to lead to an increase in cryptocurrency transactions in Nigeria. As more individuals and businesses can securely engage in crypto-related activities, the volume of transactions is expected to rise, contributing to the expansion of the crypto industry in the country.

Reaction and Feedback

Public response to the central bank’s decision

The central bank’s decision to reverse the crypto prohibition order has garnered public attention and generated significant discussion. Many individuals and businesses involved in cryptocurrencies have welcomed the move, seeing it as a positive step towards the growth of the industry in Nigeria. However, there are also differing opinions and concerns raised regarding the regulation of cryptocurrencies and their potential impact on the financial system.

Opinions and discussions in the comments section

The comments section of various news articles and online platforms has become a venue for individuals to express their opinions and engage in discussions regarding the central bank’s decision. These discussions cover a wide range of topics, including the future of cryptocurrencies in Nigeria, the impact on the economy, and the potential benefits and risks associated with increased crypto-related activities.

Global Crypto Regulation Trends

Importance of regulation in the crypto industry

Regulation plays a crucial role in the crypto industry, as it provides a framework for responsible and secure operations. Many countries worldwide are recognizing the significance of regulating cryptocurrencies and implementing measures to ensure transparency, consumer protection, and the prevention of financial crimes.

Overview of other countries’ approaches to crypto regulation

Various countries have adopted different approaches to crypto regulation. Some have embraced cryptocurrencies and blockchain technology, creating favorable regulatory environments to attract crypto businesses and investments. Others have implemented stricter regulations to mitigate risks and protect consumers. Examining these different approaches helps to inform Nigeria’s own regulatory framework and ensures alignment with global best practices.

Impact on Money Laundering and Terrorism Financing

Addressing concerns about the misuse of virtual assets

The reversal of the crypto prohibition order demonstrates Nigeria’s commitment to addressing concerns about the misuse of virtual assets. By regulating VASPs and crypto-related activities, the country aims to deter money laundering and terrorism financing, ensuring the responsible use of virtual assets and enhancing the integrity of the financial system.

Enhanced measures against money laundering and terrorism financing

The regulatory measures introduced alongside the reversal of the prohibition order provide enhanced measures against money laundering and terrorism financing. By subjecting VASPs to regulatory oversight and imposing compliance requirements, Nigeria strengthens its capabilities to detect and prevent illicit financial activities associated with virtual assets.

Future Outlook

Possible developments and changes in Nigeria’s crypto regulation

The reversal of the crypto prohibition order marks a significant milestone in Nigeria’s crypto regulation. Looking forward, it is likely that further developments and changes will occur as the country continues to adapt its regulatory framework to the evolving needs of the crypto industry. Nigeria may introduce additional guidelines, amend existing regulations, or collaborate with international bodies to enhance its regulatory capabilities.

Potential effect on the growth of the crypto industry in Nigeria

The reversal of the prohibition order and the adoption of regulations that align with global trends have the potential to foster the growth of the crypto industry in Nigeria. With improved access to banking services and regulatory clarity, individuals and businesses in the crypto space can operate with more confidence and contribute to the development of a vibrant and sustainable crypto ecosystem in the country.

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