The Central Bank of Nigeria (CBN) has directed Deposit Money Banks (DMBs) and other financial institutions to close accounts of persons who are using their systems for cryptocurrency trading.

A cryptocurrency is a virtual or digital currency that appreciates or depreciates on the whims of market forces.

Trading with Bitcoin – a cryptocurrency type – has gained traction globally and in Nigeria lately; and most young people have been investing in the cryptocurrency world, buying and selling bitcoin and making profit for themselves.

But the apex bank is clearly not a fan of digital currencies.

In a statement signed by Bello Hassan, Director of Banking Supervision; and Musa Jimoh, Director of Payments System Management Department, the CBN said: “Further to earlier regulatory directives on the subject, the bank hereby wishes to remind regulated institutions that dealing in crypto currencies or facilitating payments for cryptocurrency exchange is prohibited.

“Accordingly, all DMBs, NBFIs and OFIs are directed to identify persons and/or entities transacting in or operating crypto currency exchanges within their systems and ensure that such accounts are closed immediately.”

The CBN also declared that breaches of its directive will attract severe regulatory sanctions.

CENTRAL BANK OF NIGERIA
Barking Subpoena Department Centa use Strict PM 0107 Gan Ab
BSOD ORIGINLAB 14/001
February 5, 2021

LETTER TO ALL DEPOSIT MONEY BANKS, NON-BANK FINANCIAL INSTITUTIONS AND OTHER FINANCIAL INSTITUTIONS
The Central of Bank of Nigorta’s (CBN) circular of January 12, 2017 ref FPRDIR/GENOIR 08/010 which cautioned Deposit Money Banks (DMBA). Non Bank Financial Institutions (NBFI. Other Financial Institutions (OFis) and members of the pubic on the risk associated with transactions in cryptocurrency refers.

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 exchanges in prohibited.

Accordingly, all DBMS. NBFCS and OFis ar directed to identity persons and/or entities transacting in or operating cryptocurrency changes within their systems and ensure that such accounts are closed immediately.

Plande note that breaches of this directive will attract severe regulatory sanctions.

This letter is with immediate effect.

Yours faithfully
BELLO HASSAN
DIRECTOR OF BANKING SUPERVISION

MUSALOH
DİRECTOR PAYMENTS SYSTEM MANAGEMENT DEPARTMENT.

It is not the first time that the CBN would be showing its disdain for cryptocurrency. In 2018, the apex bank issued a circular to say cryptocurrencies are not legal tenders in Nigeria.

“For the avoidance of doubt, dealers and investors in any kind of cryptocurrency in Nigeria are not protected by law. Virtual currencies are traded in exchange platforms that are unregulated, all over the world.

“Consumers may therefore lose their money without any legal redress in the event these exchangers collapse or close business.

“Members of the public are hereby warned that virtual currencies are not legal tender in Nigeria. Accordingly, we wish to caution all and sundry on the risks inherent in such activities,” the 2018 statement had read.

Other types of cryptocurrencies are Ethereum, Litecoin, Polkadot, Chainlink, Binance coin, Tether etc.

What is CBN saying?

The new regulations mean that you will not be able to use a card from a Nigerian bank or any other financial institution in the country to process any transactions on a crypto exchange. In a nutshell, while virtual currencies remain legal, trading them through an exchange in Nigeria is near impossible.

The President Bank Customer Association of Nigeria (BAN) Dr. Uju Ogubunka, who spoke with Vanguard said that the CBN’s directive does not stop people from dealing in crypto currencies but they cannot make any transactions with cryptocurrency through the banking system.

He said: “Cryptocurrency is not the approved legal tender of Nigeria. The CBN approved the naira as the legal tender of the country. It is within the statutory procedure of CBN that the banks and financial institutions must operate.

“The CBN is not stopping Nigerians not to deal in cryptocurrency trading but they cannot do it through the banking system.”

A Tier 1 banker who spoke to Vanguard on anonymity said: “The CBN has been issuing this warning on cryptocurrency exchanges for a long time.

“With the recent circular, the CBN is saying that any person or entity who is receiving cryptocurrency as payment in his bank account and withdraws it as cash cannot do that again.

“Such a person is being called to come and close that account because it will not be functional. The bank is not saying it wants crypto dealers money. It is saying that as a crypto dealer, come and take your money and close your account.

“The implications of this policy on dealers of cryptocurrency is that they can no longer make withdrawals of cash in banks when a payment is made using cryptocurrency in Nigeria.

“Also, the Cryptocurrency exchanges like Luno and the rest will need to source other alternative means to make transactions and payments using cryptocurrencies.