CBN orders Nigerian banks to close cryptocurrency accounts - Webloaded Tech
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CBN orders Nigerian banks to close cryptocurrency accounts

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The Central Bank of Nigeria has notified Deposit Money Banks, Non-Financial Institutions, other financial institutions against doing business in Crypto and other digital assets.
In a circular dated 5th February 2021 and distributed to regulated financial firms, the apex bank of Africa’s largest economy warned and reminded local financial institutions against having any transactions in crypto or facilitating payments for crypto exchanges.

In addition, the apex bank instructed the financial institutions to immediately close the accounts of such persons or entities transacting in or operating cryptocurrency exchanges.

The Apex bank further warned the Nigerian Financial Stakeholders that any breach of this directive will attract serious regulatory sanctions.

“The Central of Bank of Nigeria’s (CBN) circular of January 12, 2017 ref FPR1DIR/GEN/C1R106/010 which cautioned Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs), 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 is prohibited.”

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

“Please note that breaches of this directive will attract severe regulatory sanctions. This letter is with immediate effect.”

Not the first time


The Central Bank of Nigeria has notified Deposit Money Banks, Non-Financial Institutions, other financial institutions against doing business in Crypto and other digital assets.

In a circular dated 5th February 2021 and distributed to regulated financial firms, the apex bank of Africa’s largest economy warned and reminded local financial institutions against having any transactions in crypto or facilitating payments for crypto exchanges.


 
In addition, the apex bank instructed the financial institutions to immediately close the accounts of such persons or entities transacting in or operating cryptocurrency exchanges.

The Apex bank further warned the Nigerian Financial Stakeholders that any breach of this directive will attract serious regulatory sanctions.

See excerpt

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“The Central of Bank of Nigeria’s (CBN) circular of January 12, 2017 ref FPR1DIR/GEN/C1R106/010 which cautioned Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs), 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 is prohibited.”

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

“Please note that breaches of this directive will attract severe regulatory sanctions. This letter is with immediate effect.”

Can the CBN actually stop trading?

The central bank has control over the banking sector and by a large extent can use its powers to determine how banks allow customers to use their bank accounts for transactions.

  • While cryptocurrencies are a digital form of currency it still relies heavily on the regular currencies for everything from pricing its value to how its ownership is being determined.
  • To buy cryptocurrencies, you can either pay with a cryptocurrency or pay in dollars using your bank account.
  • Thus, Nigerians looking to trade in cryptocurrency will now have to seek other means outside of the banking sector, assuming Nigerian banks strictly implement the new directives.
There is also the suspicion that this could be tied to the CBN’s foreign currency controls.

How Banks will stop it

  • Banks can use the KYC information of their customers to determine which of them are used for cryptocurrency-related transactions. Once this is determined, they can block the accounts or restrict anyone from depositing money into the accounts.
  • In fact, they can place a no-debit on the account, meaning that when you transfer money to a cryptocurrency trading platform, the money could be stuck as they won’t be able to access it
  • This process is very easy now that banks have BVN of their customers and can easily determine how funds are being utilized.
  • Ironically this is the very reason why cryptocurrencies exist in the first place, to stop any regulator, third party from getting in between transfers from one person to another.

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