CBN DIRECTS DEPOSIT MONEY BANKS, NON-BANK FINANCIAL INSTITUTIONS AND OTHER FINANCIAL INSTITUTIONS TO CLOSE ACCOUNTS OPERATING IN CRYPTO CURRENCY
By Kayode Adetoye
The central bank of Nigeria (CBN) has directed the immediate closure of bank accounts operating cryptocurrency exchanges in the country.
Cryptocurrencies, or digital currencies secured using encryption techniques, have seized the imagination of a motley crew of anti-capitalists, financial experts and computer scientists. At the same time, cryptocurrencies operate outside the purview of central banks and have created a regulatory conundrum for governments.
Regulation of this digital currency in Africa has been varied, with some countries offering full-throated endorsements while others look to ban or discourage its use.
The Central Bank of Nigeria (“CBN”) had adopted an interesting middle ground approach, not looking to either ban or adopt cryptocurrency but offer stern warnings to banks, financial institutions and customers not to transact in it.
In January 2017, the CBN issued a statement to all banks and financial institutions prohibiting transactions in digital currencies on account of its volatility. This shaped the tenor of the subsequent regulatory approach by the CBN, the Nigerian Securities and Exchange Commission (“SEC”) as well as consumer protection authorities. However, Nigeria is reported to have the world’s third largest number of users of digital currencies with no adverse impact reported as a result of these actions.
Lately, Nigerians have been investing in digital coins and have been making gains, hurting the other forms of investments like equities, bonds, treasury bills and others.
Apparently worried by this development, the CBN has asked all Deposit Money Banks (DMBs), Other Financial Institutions (OFIs) and Non-Banks Financial Institutions (NBFIs) to with immediate effect shut down the accounts operated by entities which facilitate the trading of digital currencies.
This was contained in a circular of February 5, 2021 ref no: BSD/DIR/GEN/CIR/06/010 signed by the Director of Banking Supervision Mr Bello Hassan and the Director Payments System Management Department Mr Musa Jimoh.