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The Central Bank of Nigeria (CBN) has circulated a letter directing banks and financial institutions to identify and close accounts of cryptocurrency transactions. The directive, which entered into force with immediate effect, threatens “severe regulatory sanctions” for financial institutions that fail to comply with them.

Banks that take immediate action

Right after the letter publicationsome banks and other financial services providers started to comply with the directive. Binance CEO Changpeng Zhao tweeted that his company had received notice from its Nigerian partners confirming that “deposits and withdrawals from Naira will be affected.” Other crypto startups such as Quidax, Buycoins Africa and Bundle have said they will to obey the guideline.

Central Bank of Nigeria orders banks to close crypto client accounts as remittances over traditional corridors drop 97%

Meanwhile, the Nigerian crypto community is reacting with anger to the directive, and many are calling the decision retroactive. Senator Ihenyen, the chairman of the Stakeholders in Blockchain Technology Association of Nigeria (SIBAN), says the CBN should explain the decision, especially now that the letter has briefly ‘disappeared’ from the CBN website. At the time of writing, an amended version of the letter appeared in place of the original version with typos.

Central Bank of Nigeria orders banks to close crypto client accounts as remittances over traditional corridors drop 97%

A ‘lazy’ decision

In the meantime, Ihenyen says it is “badly oriented” for banks and other financial institutions to simply block customers based on the CBN letter alone. The SIBAN president also suggests that the CBN may not have “the legal or regulatory power to simply order banks to refuse banking services to a number of individuals or an entire emerging industry.”

Ihenyen continues:

As I understand it, CBN can only regulate how banking services can be provided to these individuals by applying risk management such as KYC, AML / CFT regulation. The total ban, unlike the January 2017 letter, is arbitrary, illegal, irresponsible and, with all due respect, rather lazy.

While some commentators have suggested that the CBN simply recycled its 2017 guideline, Ihenyen says this view is “wrong.” According to the president of SIBAN, who is also a lawyer, “the 2017 directive frowned upon transactions in cryptocurrencies in Nigeria and completely banned banks and other financial institutions from trading cryptocurrencies.”

The same 2017 guideline “allowed the same banks and financial institutions to provide banking services to cryptocurrency exchanges and merchants provided the KYC / AML policies are enforced.” The latest directive, unlike 2017’s, “completely prohibits banks and other financial institutions from providing banking services to individuals involved in cryptocurrency trading and entities involved in cryptocurrency exchanges.”

Reduce remittance inflows

While it is unclear what could trigger the abrupt CBN decision, there is speculation that the central bank is hitting back an industry that may be diminishing its influence. This is the view shared by Nathaniel Luz, Dash’s leader in Nigeria. Luz explains to news.Bitcoin.com that the drop in remittances (an essential source of foreign exchange) could be one reason.

Central Bank of Nigeria orders banks to close crypto client accounts as remittances over traditional corridors drop 97%

As data From Nairalytics shows, remittances sent to Nigeria via traditional corridors have fallen from the January 2020 figure of $ 2.05 billion to $ 54.4 million received in September of the same year. According to Luz, many Nigerians have now switched to this crypto-based remittance channels, the CBN is now fighting back with this latest directive.

However, others have speculated that the CBN directive could be an attempt to prevent the recurrence of protests similar to those led by the Endsars movement. When authorities tried to stifle protest by freezing Endsars bank accounts, protest leaders began asking for it donations in bitcoin.

Meanwhile, some crypto influencers say they want to involve the CBN in the guideline that seems to contradict the attitude that was taken by another Nigerian regulator, the Securities and Exchange Commission (SEC) of Nigeria. At the time of writing, the CBN has not issued any statement other than the letter. News.Bitcoin.com will provide updates as more information becomes available.

What do you think of this decision by the CBN? You can share your thoughts in the comments below.

Image Credits: Shutterstock, Pixabay, Wiki Commons





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