In a surprising move, the Central Bank of Nigeria (CBN) has issued a directive for banks and other financial institutions to close the accounts of cryptocurrency exchanges. This regulation, which has raised concerns in the industry, effectively limits the ability to process transactions for crypto exchanges within Nigeria.
While virtual currencies remain legal in the country, the new regulation means Nigerians will no longer be able to use bank cards for crypto transactions, effectively hindering exchanges from facilitating crypto trading through the local banking system. The CBN’s directive also mandates that financial institutions identify and close accounts tied to cryptocurrency exchanges, disrupting businesses like BuyCoins, Patricia, and Yellow Card.
Cryptocurrency’s rise in Nigeria has been fueled in part by the CBN’s foreign exchange restrictions, which have made virtual currencies an appealing alternative for those looking to circumvent a weakening Naira. Despite the popularity of crypto in Nigeria, with the country becoming one of the largest bitcoin markets in Africa, this latest regulatory action severely limits the ability of exchanges to operate as they have been.
While virtual currencies have not been outright banned, the CBN’s move effectively isolates exchanges from the financial infrastructure needed to collect payments, potentially halting operations for many crypto platforms.
Shifting Regulatory Landscape
The CBN’s latest action reflects the regulator’s ongoing indecision on how to handle the growing cryptocurrency sector in the country. This inconsistency has been a recurring theme in Africa, where regulators often react by imposing bans on unfamiliar sectors.
The Securities and Exchange Commission (SEC) initially warned against cryptocurrency trading in 2017 but reversed its stance in 2020, recognizing digital assets as legitimate investments. The SEC’s regulations, designed to safeguard investors, were intended to provide oversight without stifling innovation. However, the CBN’s more restrictive measures have been seen as detrimental to the industry’s growth.
Crypto exchanges in Nigeria have yet to issue formal statements on the new regulations, likely due to the typical response to such sudden regulatory changes — comply first, negotiate later. However, many exchanges are already shifting funds out of Nigerian banks and preparing to explore alternative markets, though speculation about the possibility of a reversal is premature.
Crypto Regulation Across Africa
While Nigeria has been grappling with cryptocurrency regulation, other African countries have also been establishing their own policies. In Algeria, the 2018 Financial Law outright bans the use, purchase, and possession of virtual currencies. Morocco and Libya have similar restrictions. Meanwhile, South Africa is working on proposed regulations aimed at protecting citizens from fraudulent crypto operators.
In South Africa, the Financial Sector Conduct Authority has urged people to only engage with registered crypto traders, warning them about the risks of using wallets or services located in countries like Cyprus, where regulatory oversight may be absent. Despite these warnings, South Africans will still be able to use offshore crypto wallets, though they won’t have the same security guarantees as dealing with local, regulated platforms.
This situation highlights the evolving regulatory landscape for cryptocurrency across Africa, with varying approaches to balancing consumer protection with the desire to foster innovation in the sector.
