Nigeria's central bank tells the country's financial institutions to close accounts tied to crypto exchanges

Quick Take

  • The Central Bank of Nigeria issued a letter to the financial institutions it oversees to close accounts tied to cryptocurrency trading activities.
  • Crypto exchanges such as Binance reacted to the news.
  • Others are continuing normally but have publicly expressed caution.

The Central Bank of Nigeria (CBN) has issued a letter urging regulated financial institutions in the country to "immediately" close accounts connected to cryptocurrency-related activities. 

The letter, dated February 5, states that "the Bank wishes to remind regulated institutions that dealing in crypto currencies [sic] or payments for cryptocurrency exchanges is prohibited."

"Accordingly, all DMBs, NBFIs, and OFIs are directed to identify persons and/or entities transacting in or operating crypto currency [sic] exchanges within their systems and ensure that such accounts are closed immediately. Please note that breaches of this directive will attract severe regulatory sanctions," the letter continued.

Companies that offer exchange services in the country reacted to the news, though the practical responses differed from firm to firm.

Changpeng Zhao, CEO of crypto exchange Binance, said on Twitter that the exchange "[r]eceived notice from our channel partners that NGN deposits and withdrawals will be affected. Still confirming details on when/how. "Please withdraw your NGN as early as possible to avoid potential channel issues. Will share more details as they become available," he wrote.

“It is likely that the Nigeria banks will stop working with exchanges,” Zhao said in a separate tweet, predicting that peer-tp-peer exchanges will grow as a result.

Binance elaborated on the situation in a formal announcement post, explaining: "From 7PM (GMT+1) on Feb 5th 2021, Binance will temporarily suspend NGN deposits through our fiat partner channels. Withdrawal services remain normal and will continue to be processed but might take slightly longer time than usual. We apologise for any inconvenience this may cause."

Other exchange services say they plan to continue operating.

BuyCoins, a Nigeria-based exchange, wrote on Twitter that: “We are fully aware of the newest CBN circular and are going to be working with regulators to ensure our services are compliant. All trading on our platforms continues as usual, and all user funds are safe.”

Luno, a London-based exchange, announced that it too will proceed normally until receiving further information from authorities. "Some Naira deposit methods are currently affected, please check the status page for updates. Withdrawals are unaffected and will continue to be processed, but may take longer than usual. All customer funds are completely safe."

The CBN’s announcement today expands on 2017 guidelines the Nigeria Central Bank issued regarding virtual currencies, warning that they could be used for illicit activity, terrorist funding, or financial crimes. Nigerian financial institutions were forbidden from holding or transacting with digital currencies and were ordered to ensure any party who dealt with digital currency had ample anti-money laundering and know-your-customer measures in place.

Sub-Saharan Africa is currently home to the second-largest peer-to-peer Bitcoin transaction volume in the world behind North America, according to data from Paxful.

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