Why CBN’s New Guidelines Cast a Cloud on Nigerian Crypto Traders

The new guidelines, instead of paving a pathway for prosperity, seem to pose a potential peril to the pulsating crypto pulse. In the recent Human Freedom Index (HFI), co-published by the Cato Institute and Fraser Institute, Nigeria is placed at 118th, a rank too poor for Africa’s biggest economy. Most of the countries that rank highly in the Human Freedom Index invest in cryptocurrency.

Dear Advocate of Reasoning,

In this edition of our weekly newsletter, we take a look at the realm of regulations, which was the recent pronouncements from the Central Bank of Nigeria (CBN) that have stirred both curiosity and concern within the Nigerian crypto-committed community. Despite the anticipation of a clearer course, the new guidelines seem to be a cumbersome cloak rather than a clarion call for a crypto-friendly environment. Are these regulations truly fostering financial freedom or fostering friction for Nigerian traders? Favour Adeboye, one of our editorial interns, expostulates more on this issue in her latest piece titled “CBN’s New Guidelines on Crypto Still a Burden to Nigerian Traders”. 

In the piece, Favour highlighted why despite the recent U-turn decision by CBN to lift the crypto ban garnered praise, it came with a price. Although the apex bank lifted the ban on cryptocurrency transactions, there are still constraints on the exchange that limit traders’ autonomy.

Crypto was banned two years ago after several cases of cybercrime were alleged. The CBN in  February 2021, issued a circular then to deposit money banks (DMBs), non-bank financial institutions (NBFIs), and OFIs to shut accounts of Nigerians involved in cryptocurrency transactions within their systems, citing concerns over money laundering (ML), terrorism financing (TF), cybercrime, and the volatility of cryptocurrencies as reasons.

In its recent circular to all banks and other financial institutions, the apex bank conveyed “Guidelines On Operations of Bank Accounts For Virtual Assets Service Providers (VASPs).” In it, the CBN cited global trends and policies from the Nigerian SEC as reasons for lifting its earlier ban, while noting the move is also an introduction to more regulatory clarity and guidelines for digital assets and activities of VASPs.

The CBN revealed that it is done to facilitate foreign exchange inflows and virtual asset trade for VASPs, as well as to open accounts for virtual asset transactions, and it is expected that banks and financial institutions (FIs) must adhere to certain standards. But it still appears absurd that, according to the CBN, Nigerian banks and financial institutions are forbidden from keeping, dealing, and transacting in cryptocurrencies for themselves. This appears to be a paradox, more or less, or a puzzling prohibition.

The new guidelines, instead of paving a pathway for prosperity, seem to pose a potential peril to the pulsating crypto pulse. In the recent Human Freedom Index (HFI), co-published by the Cato Institute and Fraser Institute, Nigeria is placed at 118th, a rank too poor for Africa’s biggest economy. Most of the countries that rank highly in the Human Freedom Index invest in cryptocurrency, but it comes with regulations. In the recent HFI, Singapore was ranked first in terms of economic freedom. Singapore recognises cryptocurrency as a major economic booster; hence, it places no restrictions on its trade. Likewise, Switzerland, Germany, and the US. These countries recognise the advantages of cryptocurrency and prioritize it as one of their economic boosters.

The recent surge in the inflation rate in Nigeria symbolises a suffering economy. The Nigerian economy needs an augmentation, like cryptocurrency, to elevate it. Putting cuffs on the crypto trade has nothing to offer; it forms part of the unstable exchange rate plaguing the nation.

It is high time Nigeria took some things seriously, and meeting the global economic requirements is one of them. Putting cuffs on current trends because of impending dangers should be stopped. Rather, policies and regulations should be put in place to curb its effect. The Nigerian government and relevant financial institutions are hereby saddled with the responsibility of making reform policies to create a favourable trading environment for virtual assets.

The crux of the matter lies in understanding the impact of these new guidelines on individual investors, and we do hope you also reason with us on this! That’s all from us for now and don’t forget to follow us on X (Twitter) at @liberalistmag for more updates.

Previously
Oyo Farmers Bemoan Persistent Losses Amidst Continued Herder Attacks
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CBN’s New Guidelines on Crypto Still a Burden to Nigerian Traders

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