Nigeria’s Decision to Lift Crypto Trading Ban Motivates Crypto Exchanges to Apply for Licenses
by Oskar Trotman
The Central Bank of Nigeria removed a restriction on cryptocurrency transactions imposed in financial institutions in February 2021. The ban resulted from concerns about the possibility of using crypto to fund terrorism and money laundering.
However, on Friday, December 22, the Central Bank of Nigeria provided a new set of guidelines for banks and other types of financial institutions on how to function as channels for crypto asset trading. The change results from the Central Bank’s stated opinion that global trends have revealed a necessity for more regulation in the sphere of virtual asset service providers (VASPs).
The news of the ban’s removal sparked interest among crypto exchanges to enter the market. Yellow Card Financial is one crypto exchange that announced plans to apply for a Nigerian license. Representatives of this Pan-African crypto exchange have revealed to Bloomberg that they were waiting for this opportunity and are ready to enter the regulated Nigerian market immediately.
New Rules For Crypto Transactions
The latest rules by the Central Bank of Nigeria outline how financial institutions should open accounts and offer designated settlement accounts and services for companies transacting in crypto assets. The firms working with digital assets must secure a license from the Nigerian SEC and abide by the specific requirements before they can start offering their crypto services in Nigeria. The latest announcement from the Central Bank of Nigeria also highlighted that banks cannot hold, trade, or transact with cryptocurrencies.
Nigeria’s young demographics and tech-savvy population offer a fruitful ground for the crypto industry in this African nation. A recent study conducted by blockchain company Consensys, covering 15 countries, found that cryptocurrency awareness is the largest in Nigeria, with 91% of Nigerian respondents saying they are willing to invest in crypto. About 58% of surveyed Nigerians believe that cryptocurrencies are the future of money.
The study also reveals that Nigerians fear crypto scams, with 52% expressing concerns about fraud and 63% pointing to market volatility as a hindrance to entering the crypto ecosystem. The research from Consensys is supported by research firm Chainalysis, which in September reported that crypto transactions in Nigeria increased by 9% between July 2022 and June 2023.
Yellow Card To Expand Range of Services
Currently, Yellow Card Financial provides limited cryptocurrency services in Nigeria and is active in 15 other African countries. The crypto exchange enables Nigerian residents to purchase and sell Bitcoin and Tether with the naira, and the new licensing opportunity will allow Yellow Card to cater to the crypto business needs of institutional investors. So far, that has been prevented by the inability to secure a license because of the ban on opening a bank account.
Nigeria is experiencing a rapid adaptation of cryptocurrency, partly stimulated by the depreciation of the naira, Nigeria’s domestic currency. Nigerians are looking towards cryptocurrency as a safety net against rising inflation in recent years.