Central Bank of Nigeria’s Policy Shift on Virtual Assets: A New Era For Nigeria’s Crypto Market

The end of 2023 marked an important moment for the Nigeria market, after the change in policy by the Central Bank of Nigeria (CBN), after raising a two -year restriction on transactions on cryptographic assets.

Recall that in a circular dated February 5, 2021, the CBN ordered all the banks to refrain from transgugance with entities dealing with cryptocurrency. Banque Apex has also ordered banks to close the accounts of people or entities involved in cryptocurrency transactions within their systems.

Following the recent reversal of the policy, the CBN noted that it had been stimulated by the current global trends in cryptographic transactions, which showed the need to regulate the activities of virtual asset service providers (VSP).

The new policy required that VASPs should be authorized by the Nigerian Commission for Securities and Exchange (SEC) to engage in the cryptography sector. By introducing guidelines for financial services providers working with VALPs, the CBN has reported an evolution towards structured regulations. These guidelines should provide essential clarity The digital asset market, meeting concerns related to security, governance, compliance and surveillance. Consequently, the formalization of the sector should strengthen the confidence of investors, reduce the risks perceived of cryptographic transactions and promote a broader adoption of virtual assets in Nigeria.

Quick advance until 2024, the Nigerian Commission for Securities and Exchange (SEC) granted provisional licenses or “approval” to two cryptocurrency exchanges, Quidax and Busha, within the framework of its accelerated regulatory regulations Incubation program (ARIP). ARIP was created to integrate companies that had started operations before the publication of virtual asset service providers’ rules in May 2022.

This means that the Quidax and the Busha are now part of an ARIP cohort as digital asset exchanges. The cohort also includes four digital asset supply platforms and a digital active guard. Digital asset supply platforms are Trovotech, CDC wrapped, Housingexhange and Dream City Capital. The only digital active guard is the Blockvault goalkeeper. The SEC has described the committee’s commitment to promote innovation while ensuring the protection of investors and the integrity of the market.

The introduction of these licenses is part of a wider regulatory framework designed To bring the order to the cryptographic space previously ambiguous in Nigeria. He also stressed that the program aims to balance innovation with the necessary regulatory guarantees, creating a safe environment for investors and industry participants. This decision is particularly remarkable given the history of the regulatory challenges facing the exchanges of crypto in Nigeria.

Over time, the structured regulatory approach will help establish standardized operational practices, improve safety protocols and improve investor protection. This will not only benefit Fintech companies operating in cryptographic space, but will also provide them with greater legitimacy and access to financial services, allowing companies to expand. Despite the previous restrictions, the Nigeria virtual asset economy has remained resilient and these new regulations should fuel growth.

In particular, one of the most important developments following the CBN policy change is the announcement of the Africa Stablecoin Consortium (ASC) to launch its stablecoin, CNNG, in the first quarter of 2024. ASC was accepted In the regulatory sandbox of the CBN to lead a pilot for Stablecoin, which will be fixed 1: 1 with the Naira.

Designed to facilitate seamless cross -border transactions, CNNG is well positioned for Accelerated adoption in the new regulatory framework. The transition from the CBN to a pure and simple ban on a nuanced regulatory approach highlights its recognition of the potential advantages of virtual assets. While regulations continue to evolve, their impact on the cryptographic landscape of Nigeria will be closely monitored, with the expectations of a more structured, secure and prosperous digital asset ecosystem.