In analysing the regulation of cryptocurrencies in Nigeria, the government must consider what this regulation will look like and for whom.
On 05 February 2021, the Central Bank of Nigeria (CBN) issued a letter to all Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs) and Other Financial Institutions (OFIs) operating in Nigeria. In this letter, the CBN reminded the banks and institutions of a 2017 circular, in which the CBN had advised of the risks of transacting in cryptocurrency and instructed them not to ‘use, hold, trade and/or transact in any way’ in such currencies, pending substantive regulation or decision by the CBN. The 2021 letter, in addition, directed all DMBs, NBFIs and OFIs to ‘identify persons and/or entities transacting in or operating cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately.’ The letter also stated that breaches of the directive would attract severe regulatory sanctions.
The directive, which was widely shared on social media, provoked a variety of comments and reactions from Nigerians, the majority of whom were concerned about its implications for cryptocurrency trading in Nigeria. In response, on 7 February 2021, the CBN published a five-page press release to justify the central bank’s position to the general public and to reiterate that the anti-cryptocurrency policy had been in existence since 2017. Essentially, the CBN’s position on cryptocurrencies is that the anonymous, unaccountable, unregulated and volatile nature of cryptocurrencies exposes investors, traders, and associated financial institutions that interact with such currencies to significant financial and cyber risks. Additionally, the CBN stated that the use of cryptocurrencies in Nigeria goes against the key mandates of the CBN as the issuer of legal tender in Nigeria (a role enshrined in the CBN Act of 2007). Consequently, the CBN argued, the use of cryptocurrencies in Nigeria is a direct contravention of existing law.
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