ZoneBitcoin EditorialIn 2021, the Central Bank of Nigeria (CBN) had imposed a complete ban on banks from engaging with digital currencies.
However, two years later, the financial institution made an about-face, easing restrictions on Nigerian banks facilitating crypto transactions. This is an announcement received positively by a large part of the Nigerien population, which is the second population in the world to use cryptocurrencies the most, After India according to a study by Chainalysis.
Faced with such enthusiasm for cryptocurrencies, the country's government then seems to bow (out of spite?) with the uses and the will of the population. This also corresponds with current global trends in the ever-increasing use of cryptocurrencies in different sectors.
The new CBN guidelines
According to a circular statement sent to banks on December 22, the CBN recognized that the growing global demand and adoption of crypto makes it unjustifiable to continue stringent restrictions on financial institutions in 2021. In it, the CBN established minimum standards and requirements for establishing banking relationships and opening accounts for virtual asset service providers (VASPs) in Nigeria.
Thus, “Nigeria’s CBN has removed restrictions on cryptocurrency transactions. The initial 2021 order banned banks from crypto-related transactions.
The latest circular, however, gives clear guidelines in favour of crypto, but with stringent KYC and anti-money laundering checks for customers.”
However, financial institutions are still prohibited from holding, trading or transacting cryptocurrency using their own accounts. They will have to go through intermediaries recognized as VASPs to do this, which nevertheless represents a relaxation of restrictions.
Launch of cNGN, a new stablecoin for a new economy
In addition to relaxing the rules for crypto transactions, Nigeria’s major banks have collaborated to create and oversee a new stablecoin called “cNGN.” This new digital currency is designed to bring benefits to both token holders and the Nigerian economy as a whole.
The cNGN is backed and indexed to the Nigerian naira, the country's fiat currency. Like popular stablecoins, cNGN offers interoperability with various public blockchains, facilitating effortless global transfers and expanding its use in commercial operations.
“cNGN is a consortium-backed, compliant and regulated stablecoin. It maintains a parity with the naira in a bank reserve account.”
What is the difference with eNaira?
Unlike the central bank digital currency eNaira, the new stablecoin is developed and hosted on public blockchains (like Polygon, Ethereum, BNB Smart Chain and Tron). It is driven by leading blockchain and fintech companies, with major banks acting as authorized custodians.
The digital currency eNaira had received strong criticism from the population due to its non-operability with other blockchains. This functioned like a basic electronic currency without the advantages of cryptocurrencies hosted on blockchains. Nigerians could only use the eNaira on a dedicated national wallet, which greatly hindered daily exchanges and transactions. On the other hand, with cNGN, transactions on different blockchains will make it more popular with populations and businesses.
Conclusion
While Nigeria has historically had a restrictive approach towards cryptocurrencies, these latest announcements mark a significant shift in the country's attitude towards digital assets.
The lifting of restrictions on crypto transactions by the CBN and the launch of cNGN highlight the growing importance of blockchain technology and cryptocurrencies in the Nigerian economy. It is clear that the country is now ready to embrace the benefits of blockchain technology and explore its possibilities further.
The implications of these actions for the future of cryptocurrencies in Nigeria remain to be closely observed. Interestingly, the paradigm shift in government is taking place from the bottom up, from the people to the government. Many experts believe this is the best way to drive bitcoin adoption in a country and around the world.
Nigerians are among the most enthusiastic people in their use of cryptocurrencies and the government seems to understand – slowly – the benefits that this could bring to the country.
This decision also adds hope for countries experiencing prohibitions to use Bitcoin as the Morocco or Algeria to be able one day to see the laws be in favor of the latter…
Inch'Allah, as they say then.
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