Nigeria's Crypto Industry: A Tumultuous Journey Amid Government Regulation and Promised Legalization
Summary:
Nigeria's cryptocurrency industry experiences a mix of optimism and uncertainty due to the policies and actions of President Bola Tinubu's administration. Tinubu pledged to legalize crypto and blockchain technology for Nigeria's banking sector, but actions such as a clampdown on P2P trading have cast a shadow over the industry. The Nigerian SEC has issued regulations for digital assets, albeit banks can't trade or hold virtual assets within their portfolios. The government is now preparing to introduce regulations banning P2P cryptocurrency exchanges using the national currency, the Nigerian naira.
Nigeria's cryptocurrency industry is navigating a blend of optimism and uncertainty. Industry participants feel their field has been shrouded in ambiguity due to the practices and regulations of President Bola Tinubu's administration over the past twelve months. During his electoral campaign, President Tinubu promised to legitimize cryptocurrency and its underlying technology, blockchain, in Nigeria's banking and financial arena. This commitment was welcomed due to its potential to fortify the nation's unstable economic climate.
Nevertheless, the young demographic of Nigeria is growing increasingly perplexed by the government's recent actions towards the country's cryptocurrency industry. Olumide Adesina, a market commentator at Quantum Economics, voiced in a note shared with Cointelegraph, the industry's urge for explicitness and endorsement to realize its full potential. Adesina pointed out that actions like the latest crackdown on P2P trading, the detention of a Binance executive, and accusations of currency manipulation by government officials have temporarily cast a shadow over the industry.
Nathaniel Luz, the head of Flincap — a liquidity platform that supports crypto exchanges — posed that President Tinubu holds an extraordinary opportunity to mould Nigeria's blossoming cryptocurrency sector, similar to what prior heads of state have done for the banking industry. Luz highlighted the maturation of the cryptocurrency sphere and suggested that it is up to President Tinubu to navigate its future. He voiced that more initiative from the administration is anticipated.
In May 2023, the Nigerian Securities Exchange Commission (SEC) issued rules for digital assets. This move indicated that the regulatory body was trying to strike a balance between an outright ban and no regulation at all. By December, the Nigerian SEC revoked its prohibition on banks managing accounts for cryptocurrency service providers. The central bank noted that global trends are pointing towards a necessity to regulate Virtual Asset Service Providers (VASPs) operations, which encompass cryptocurrencies and assets.
In January, the Central Bank rolled out its preliminary guidelines for banks to open cryptocurrency accounts. However, the banks still can't trade or hold virtual assets within their own portfolios. These guidelines encompass strict Anti-Money Laundering (AML), Know Your Customer (KYC), and other procedures. Additionally, banks are required to set moderate transaction limits, and cash withdrawals from crypto accounts are still prohibited.
By May 2024, Nigeria's government started drafting new legislations to outlaw peer-to-peer (P2P) cryptocurrency exchanges using the national currency, the Nigerian naira.
Published At
6/2/2024 12:33:19 PM
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