Nigeria’s Central Bank Bans Banks From Serving Crypto Traders and Exchanges

News / 05.02.2021

A few months after news of an upcoming regulatory framework for cryptocurrencies in Nigeria, crypto traders in the country have been faced with shocking news from the Central Bank of Nigeria (CBN). The apex bank has ordered financial institutions in Nigeria to stop offering banking services to crypto exchanges and other related businesses. 

In a circular issued by the CBN on Friday, February 5th, 2021, the regulator demanded that all Deposit Money Banks(DMBs), Non-Financial Institutions (NBFIs), and Other Financial Institutions (OFI), should identify their clients, both individuals and institutions, who operate with cryptocurrencies and ensure that their accounts are closed immediately.

The circular also came with a strict warning from the CBN, stating that there will be severe consequences if its demands are not met. It said, “Note that breaches of this directive will attract severe regulatory sanctions.”

Africa’s Biggest Crypto Market In Trouble

Earlier in 2017, the CBN had issued a similar circular warning financial institutions and public members regarding the various risks associated with cryptocurrency transactions.

However, that circular did not advise individuals and entities to avoid crypto trading, crypto exchanges to ensure that clients meet up with the AML/KYC requirements and report illicit transactions to the appropriate authorities.

This new directive would indicate a more hostile stance on cryptocurrency trading in the country than the earlier circular.

Being Africa’s largest bitcoin market, the new trade restriction will adversely affect crypto holders in Nigeria and take a huge toll on the rapidly growing market.

Crypto users have been buying digital currencies from cryptocurrency exchanges easily, using their debit and credit cards and bank transfers. However, once the trade restrictions take effect, holders can no longer conduct these transactions seamlessly.

Crypto Transactions Will Continue

While the CBN’s action will undoubtedly affect the Nigerian crypto market, there are some other ways that crypto proponents in the country can continue to conduct transactions amid the restrictions without going through crypto exchanges.

Several peer-to-peer exchanges like Paxful or Binance P2p come in handy in times like this. Also, there are unofficial p2p communities available on social media sites, including WhatsApp, Facebook, and Telegram, where members buy and sell cryptocurrencies among themselves.

However, the danger with these communities is the high risk of falling victim to scammers. As a result, users may need to proceed with caution when trading in these unofficial p2p marketplaces. 

Meanwhile, at the time of this report, local exchanges are still processing bank withdrawals.

Mandy Williams joined the crypto space in 2016, and since then she has been learning and writing about cryptocurrencies and blockchain technology.