On August 29 2024, the Nigeria’s Securities and Exchange Commission (SEC Nigeria) issued the country’s first crypto licenses to 2 local crypto exchanges and 5 digital aset offering platforms. This marks a new phase in Nigeria’s complex relationship with cryptocurrency, following earlier considerations by the SEC and the Central Bank of Nigeria (CBN) to regulate peer-to-peer transactions in early 2024.
🇳🇬REGULATION | Nigerian Crypto Exchange, Quidax, Receives Provisional Operating License from SEC Nigeria
With the license granted by the Nigerian SEC, Quidax is now able to collaborate with banks and other financial institutions, subject to the Central Bank of Nigeria’s… pic.twitter.com/4gPpLyJi4z
— BitKE (@BitcoinKE) August 29, 2024
Despite the CBN lifting its December 2023 directive that prohibited banks from ‘dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges,’ it began instructing banks to block the accounts of peer-to-peer traders by May 2024.
🇳🇬 REGULATION | Central Bank of Nigeria Lifts 2021 Ban on 18 Companies for ‘Dealing in Crypto’ and Weakening the Naira
In 2021, in an affidavit, the Central Bank of Nigeria claimed that the platforms were violating Nigeria’s trading laws including dealing in cryptocurrency in… pic.twitter.com/LcMl6svklA
— BitKE (@BitcoinKE) August 7, 2023
On August 23 2024, a high court in Uyo, Nigeria, rejected a request to unfreeze Patrick Okon’s Kuda bank account, which had been restricted due to its involvement in crypto payments. In April 2024, the Economic and Financial Crimes Commission (EFCC) sought a court order to block over 1,000 bank accounts linked to cryptocurrencies.
🇳🇬REGULATION | Nigeria Freezes Crypto Accounts with Over $37 Million in $USDT Belonging to Suspected Protest Organizers
The wallet with the lion’s share of the assets has over $37 million in $USDT while another has over $400,000 in $USDT.https://t.co/RyifU23UB0 @Tether_to… pic.twitter.com/9U8pax0MP8
— BitKE (@BitcoinKE) August 14, 2024
The Long Road to Nigeria’s Crypto Licenses
In March 2024, Nigeria’s financial regulators halted prominent fintechs from onboarding new customers for five weeks amid a worsening currency crisis. The authorities acted against Binance, accusing the platform of manipulating the naira and detaining two of its executives.
REGULATION | Crypto Exchanges to Stop StableCoin Sales in Nigeria Amid Apparent Crackdown
“There was a meeting of crypto founders on Tuesday [February 27 2024] morning, and a number of them agreed to suspend the trades on their platform,” a person at that meeting told a local… pic.twitter.com/iiYBuYrpOu
— BitKE (@BitcoinKE) February 29, 2024
As the legal battle involving Binance executive, Tigran Gambaryan continues, the CBN has required fintechs to block any accounts suspected of crypto trading. The SEC, which granted the recent crypto licenses, also suggested in May 2024 that exchanges should avoid peer-to-peer transactions as a patriotic measure.
🇳🇬REGULATION | Local Players Expect Nigeria to Ban Peer-to-Peer Crypto Trading Soon
Already, three Nigerian fintech startups – Moniepoint, Paga, and Palmpay – will block the accounts of customers dealing in cryptocurrency and report those transactions to law enforcement.… pic.twitter.com/2pk9AjrxWJ
— BitKE (@BitcoinKE) May 6, 2024
These inconsistent policies are likely to keep banks and fintechs at arm’s length from crypto-related activities.
“Crypto is still persona non grata. The CBN has not openly accepted it yet,” a bank executive, who preferred to remain anonymous, remarked.
Despite the SEC’s issuance of provisional licenses to Quidax and Busha, senior executives at major fintech startups report that banks are ignoring these licenses.
🇳🇬REGULATION | Nigerian Fintechs to Resume Customer Onboarding and Block Crypto Accounts After Central Bank Lifts Suspension
At the same time, the bank asked major fintechs including Moniepoint, Paga, and PalmPay to block the accounts of customers dealing in cryptocurrency and… pic.twitter.com/2XUl7mxozI
— BitKE (@BitcoinKE) June 14, 2024
Omotimi Agama, the SEC’s director-general, assured that ‘the CBN has lifted any ban.’
While Agama’s statement is accurate, banks and financial institutions remain cautious, choosing to err on the side of safety with the Central Bank.
“The devil is in the details,” a top fintech executive commented.
“The [guideline] is confusing, and the processes are challenging.”
Chike Okonkwo, Founder of blockchain startup, Gamic, which has been in discussions with the SEC since 2019, empathizes with the banks’ hesitation.
“If that circular [greenlighting] the banking of crypto firms is binding, why can’t retail traders freely add crypto to the description of their banking transactions?”
Busha, one of the new licensees, is more hopeful about improving relations between banks and crypto companies.
“The issuance of the crypto licenses is a critical step in maturing the industry. It means that users can engage with operators with increased confidence, which should generally deepen the market,” a Busha spokesperson said.
The company also states it is prepared for any ‘tight but effective regulations‘ deemed necessary by the CBN.
Until clarity is achieved, banks and fintechs will likely continue to tread cautiously to avoid potential conflicts with the CBN.
“Nigerian banking laws are not customer-friendly,” a high-level fintech executive noted, adding that “financial institutions [retain] the right to freeze any account they have reasonable suspicions about any infraction or illicit activity.”
Are crypto trades illegal?
Two new licenses and the CBN’s December 2023 directive suggest they are not.
However, an operations manager at a commercial bank stated,
“We can only acknowledge the license after receiving instructions from the CBN, our regulator.”
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