People have been wondering for some time now “is cryptocurrency legal in Nigeria?” Bitcoin has not been deemed illegal in Nigeria, but it is unregulated, and banks and other financial institutions are not allowed to deal in cryptocurrencies. Cryptocurrency transactions themselves are not illegal, but the use that the user makes of the cryptocurrency in the transaction decides whether it is.
There is no explicit law in Nigeria that forbids or criminalizes bitcoin trading, but to effectively answer this question, we may need to go back in time to ask what has prompted this question to be asked, to begin with? The latter question can be answered with a very short interlude.
On the 5th of February, 2021, the Central Bank of Nigeria released a letter to all Nigerian banks, directing them to close all local bank accounts involved in trading anything related to cryptocurrencies, and making sure anyone caught involved in trading cryptocurrencies regardless will face sanctions.
IS CRYPTOCURRENCY LEGAL IN NIGERIA
Since cryptocurrencies are not recognized by the Central Bank of Nigeria (CBN), which oversees Nigeria’s financial market, there is no regulatory framework or licensing system in place for cryptocurrency operators. According to CBN, a circular addressing cryptocurrency or virtual currency operations in Nigeria was distributed to banks and other financial institutions in January 2017.
According to the letter above, the CBN followed up and asserted that because cryptocurrencies are not legal tender and are produced by unregistered and unregulated businesses, it is illegal to use them in Nigeria. CBN acknowledged the issue of cryptocurrency anonymity. It said that cryptocurrency was open to illegal uses like money laundering and terrorism funding due to its anonymity and lack of KYC. Another justification was the alleged threat posed by cryptocurrencies to the stability of other nations’ banking systems.
In a recent statement, the Securities and Exchange Commission (SEC), which initially declared its intention to regulate “digital assets such as cryptocurrencies,” said it would work with the Central Bank of Nigeria (CBN) to examine and better comprehend the risks associated with cryptocurrencies in order to ensure that the necessary regulations are in place in the event that cryptocurrency transactions are permitted in the future.
Cryptocurrencies are subject to a number of complaints, the most prevalent of which being that their use is linked to criminal activity. Additionally, it has been demonstrated that the characteristics of cryptocurrencies make them perfect for a range of illegal activities, including drug trafficking, tax evasion, and money laundering.
The fact that cryptocurrencies are based on the principle of decentralization, this makes it impossible for them to be governed by a single entity in the same way that conventional currencies are. There isn’t yet a uniform global structure in place to control virtual currencies. The efforts of many nations are essentially what determine how it is regulated. As usage grew after the ban in February 2021, the Nigerian government’s earlier efforts to suppress cryptocurrency activities may have also been fruitless.
The Securities and Exchange Commission (SEC), the principal supervisor of the Nigerian capital market, some time ago released a statement on digital assets, their classification, and treatment, with a focus on the regulation of cryptocurrencies in Nigeria. According to the Commission, there will be three ways to regulate innovation in the crypto currency space: safety, market expansion, and offering solutions to problems. These three factors will guide the Commission’s regulations, strategy, and interactions with innovators looking for legitimacy and relevance in this expanding market.
The SEC followed up by establishing regulatory guidelines for digital currencies and crypto-based businesses or startups, saying that they will monitor investments in crypto-tokens or crypto-coins in cases where the nature of the investments meets the criteria for securities transactions and that the regulations’ objective is to establish standards that promote ethical behavior, not to obstruct technology or innovation.
Although there is a tremendous desire to do so quickly, Nigeria has not yet established a legal framework or legislation for cryptocurrencies or crypto exchanges. Almost 24 months after curtailing activities related to cryptocurrencies in Nigeria, a law recognizing the use of Bitcoin and other cryptocurrencies as a way to stay up with “global standards” will reportedly soon be passed by the Nigerian government, following an interview with the chairman of the House of Representatives Committee on Capital Markets, Babangida Ibrahim, Punch Newspapers (a Nigerian publication), broke the news on December 18, 2022. According to the report, if the Investments and Securities Act 2007 (Amendment) Bill becomes law, the local Securities and Exchange Commission will be able to “recognize cryptocurrency and other digital funds as capital for investment.”
The challenges associated with cryptocurrency’s global regulation are undoubtedly attributable to the fact that cryptocurrencies are unique and the problems they were designed to address pose a danger to central authority.
Olisa Agbakoba Legal (OAL, an Award-Winning Law Firm in Nigeria), makes us understand that the Central Bank of Nigeria (CBN) is essentially saying that cryptocurrencies are not officially recognized as money in Nigeria, but they are not illegal, by asserting that they are not legal tender in the country.