Nigeria Central Bank Lifts Crypto Transaction Ban, Igniting Competitive Race Among Exchanges
Summary:
The Central Bank of Nigeria (CBN) has lifted prior restrictions on Nigerian banks' engagement in cryptocurrency transactions, as stated in a circular issued on December 22. This reversal is likely to ignite intense competition between crypto-fiat exchanges and peer-to-peer merchants. The ban originally aimed to suppress Bitcoin and other cryptocurrency usage in Nigeria but resulted in a shift towards peer-to-peer trades. This development is being received positively within the local crypto ecosystem. However, it also suggests that a tussle for control over the world's largest crypto P2P market is imminent. Despite the challenges it may present to startups, the requirement of SEC registration for exchanges is seen as a potential boon for the Nigerian cryptocurrency sector.
On December 22, a memorandum from the Central Bank of Nigeria (CBN) to banks stated that the previous restrictions on Nigerian banks' involvement in cryptocurrency transactions have been lifted. This is expected to spark a fierce competition between crypto-fiat exchanges and peer-to-peer (P2P) merchants. The CBN's prohibition of Nigerian banks' participation in cryptocurrency transactions was initially implemented to stifle the use of Bitcoin and other cryptocurrencies in Nigeria, resulting in P2P merchants occupying a dominant position. However, the cryptocurrency community adapted by pivoting to peer-to-peer transactions or direct payments. Various stakeholders in the local cryptocurrency ecosystem were contacted by Cointelegraph to shed light on the industry's view on this development. In an interview with Cointelegraph, Nathaniel Luz, a co-founder and CMO of Flincap, noted that the removal of the ban is beneficial for the industry. He believes this move signifies Nigeria's readiness to accommodate and facilitate cryptocurrency businesses. Luz highlighted that institutional exchanges should start preparing for the Nigerian market as their initial absence amidst the ban paved the way for P2P transactions to escalate, negatively impacting other cryptocurrency businesses. Luz stated, “The situation ahead will be a survival of the fittest with crypto-fiat exchanges and P2P merchants vying for control of the world's largest crypto P2P market.” When asked if the need for registration with the SEC would dissuade exchanges from entering the Nigerian market, Luz acknowledged that obtaining the SEC license might be challenging for startups, but he also expressed faith in its positive impact on the cryptocurrency industry. He also touched upon alterations in Nigeria’s banking sector in 2010 due to a recapitalization policy, resulting in investors taking over some banks and forcing others to merge, improving the sector's state. In February 2021, Cointelegraph published a report stating that the Central Bank of Nigeria had forbade all regulated monetary institutions from servicing crypto exchanges. Yet, in light of the rapidly growing international demand and acceptance for cryptocurrency, the latest CBN memorandum acknowledges that keeping severe restrictions on financial institutions in place could no longer be justified.
Published At
12/24/2023 12:53:02 PM
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