The Central Bank of Nigeria’s Directive on Closure of Cryptocurrency Accounts
The Central Bank of Nigeria has directed Deposit Money Banks, Non-bank Financial Institutions, and Other Financial Institutions to close all accounts of persons and entities operating cryptocurrency exchanges within their system.
This is the third major action in the last four years undertaken by the Central Bank of Nigeria regarding transactions in virtual currencies. Despite this directive and other similar actions undertaken in various jurisdictions globally, the cryptocurrency/digital currency market remains fast growing and ubiquitous across the world, making national and regional governments grapple with their regulation.[1] The most popular cryptocurrencies are Bitcoin, Ripple, Ethereum, and Litecoin. They dominate the cryptocurrency market and are highly popular among traders and investors.[2] A report indicated that seventeen million bitcoins have been created with an aggregate value of $137 Billion in 2018.[3] These assets raise questions about their utilisation as a means of legal exchange, the risks of loss of investment, and the opportunity to create illegal activities like money laundering and terrorism. Therefore, warnings have been issued in various countries to caution the public that digital currencies are not legal tender and that investors risk losing their entire investment. Some countries also have expanded their anti-money laundering, counter-terrorism, and organised crime legislation to include cryptocurrency markets.[4] In some countries, dealings in cryptocurrencies such as bitcoin have been prohibited.[5]
Nigeria is not left out of the cryptocurrency market. Several high net worth individuals have used cryptocurrency to navigate currency fluctuation and hedge their portfolio of investments. Some reports indicate that, apart from the United States, Nigeria has traded the largest volume of bitcoins worldwide, which is valued at $566 million.[6] Like other countries, the Central Bank of Nigeria and the Securities and Exchange Commission have also issued warnings concerning the risks related to cryptocurrencies.
[1] The Library of Congress, Global Legal Research Center, The Regulation of Cryptocurrency Around the World (2018) p.1
[2] See Major Cryptocurrencies: Live Rates & Trading Tips (dailyfx.com) accessed on 8.02.2021.
[3] The World Bank Group, Cryptocurrencies and Blockchain (2018) World Bank ECA Economic Update p.25
[4] The Library of Congress, Global Legal Research Center, The Regulation of Cryptocurrency Around the World (2018) p.1
[5] Ibid p.4
[6] See Nigeria is No.2 bitcoin market after the US on Paxful — Quartz Africa (qz.com) accessed on 8.02.2021.