The Central Bank of Nigeria (CBN) has instructed that all bank accounts relating to cryptocurrency trading in the country be closed by all financial institutions.
Observers until now regarded Nigeria as one of the major players on the African continent when it comes to cryptocurrency adoption. However, the latest stance by the Central Bank of Nigeria (CBN) could drastically alter this view.
The order comes in a recent letter signed by the CBN director of banking supervision, Bello Hassan. In the letter, Hassan ordered that all financial institutions disengage from facilitating cryptocurrency payments within the country.
The announcement also instructs all Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs), as well as Other Financial Institutions (OFIs) to cease operations with cryptocurrencies.
The instruction from Hassan further clarifies that these financial institutions are required to identify all persons transacting in cryptocurrencies. Moreover, the institutions must close their accounts immediately.
CBN Takes Two Steps Back
The statement re-iterates that dealing in cryptocurrencies is prohibited. It states that, “Further to earlier regulatory directives on the subject, the Bank hereby wishes to remind regulated institutions that dealing in cryptocurrencies or facilitating payments for cryptocurrency is prohibited,”
The news comes as a huge blow to the Nigerian crypto community. Nigeria is one of the major crypto countries on the continent. Many Nigerians adopted cryptocurrency transactions as a method to move funds both locally and internationally.
The history of declines of Nigeria’s local currency, the Naira, has done little to help the country. This led cryptocurrencies to gain popularity as the Naira continues to devalue.
Nigeria is not alone in the connection between currency devaluation and crypto uptake. Elsewhere, Venezuela and Lebanon, both of which dramatically devalued their local currencies, also saw large crypto communities emerge.
Crypto adoption is therefore a vital part of storing value and moving funds during times of fiat devaluation.
Nigerian SEC Looking To Regulate Cryptos
Recently, the Nigerian Securities and Exchanges Commission (NSEC) announced that it considered cryptocurrencies to be recognized as securities. Observers took the NSEC’s move as a step forward for the African country. However, the CBN, still trying to determine how to regulate the industry, had yet to reaffirm its position on the industry.
The Nigerian Finance Ministry had also outlined plans to work with the SEC to formulate a regulatory framework for the cryptocurrency industry. It appears, though, that this new stance by the CBN will negatively affect these plans.
The CBN’s move comes just two months after the Finance Ministry announced it would be looking to determine a framework for regulating the market. The ensuing closure has cast doubt on if there is a possible way forward.
Binance Halts NGN Deposits
Binance CEO Changpeng Zhao announced that the exchange would be halting Naira (NGN) deposits pending the announcement by the CBN.
The move surprises many in the industry, with Nigerians now concerned for the future of the market in the country. Furthermore, the path for the adoption of cryptocurrencies at all in Nigeria is unclear now as well.