Abdul Muhammed Law Practice
Abdul Muhammed Law Practice’s Lead Lawyer Abdulateef Muhammed examines the CBN’s new crypto policies, the challenges and opportunities for Nigerian VASPs.
Introduction
Nigeria has recently witnessed significant developments with the Central Bank of Nigeria (CBN) allowing banks to open accounts for Virtual Asset Service Providers (VASPs) effective December, 2023.
It is crucial for Nigerian cryptocurrency industry players, cryptocurrency lawyer and other legal professionals to understand the implications of these new policies.
In this article, we will explore the challenges and opportunities that arise for VASPs in Nigeria, drawing comparisons with regulations in other jurisdictions.
Burden of compliance
The CBN’s move signals a step towards regulatory acceptance, but it also brings forth increased compliance requirements for VASPs and navigating through the regulatory landscape and ensuring adherence to the new guidelines may pose their challenges.
Operational adjustments
‘De-risking’ and ‘de-banking’ describe situations where a bank for a variety of reasons could suspend the operations of the banking facilities that is offered to a customer.
VASPs would prefer to avoid having to deal with temporary suspension of banking services, and as such must now make operational adjustments to align with the regulatory framework.
This includes implementing robust Know Your Customer (KYC) and Anti-Money Laundering (AML) procedures, which may require significant investments in technology and personnel training in maintaining a culture of compliance.
Market uncertainty
The cryptocurrency market is known for its volatility. VASPs operating in Nigeria may face uncertainties surrounding regulatory stability, impacting market confidence and investor trust.
Opportunities arising
Next we will examine some of the opportunities that may arise from the new policies.
Legitimacy
The CBN’s recognition of VASPs by permitting banks to open accounts for them provides a level of legitimacy to the cryptocurrency industry in Nigeria. This could attract more mainstream investors and users.
Financial inclusion
With the banks onboard, as it were there is a potential for increased financial inclusion. VASPs can leverage the traditional banking infrastructure to reach a broader audience, making cryptocurrency services more accessible to the general public.
Global competitiveness
Nigeria’s move aligns with global trends in regulating the cryptocurrency space. This could position Nigerian VASPs as attractive options for international investors, thereby fostering global competitiveness.
Comparison with other jurisdictions – striking a balance
Some jurisdictions have embraced cryptocurrency with open arms, adopting a more permissive approach.
Others have taken a more cautious stance.
Nigeria’s approach seems to strike a balance between fostering innovation and addressing regulatory concerns.
Collaboration with Banks:
Not all countries have allowed VASPs access to traditional banking channels.
Nigeria’s decision to collaborate with banks demonstrates a unique approach that could serve as a model for other nations seeking ways to integrate cryptocurrencies into the traditional financial system.
Conclusion
As Nigeria’s crypto legal landscape evolves, VASPs must stay informed and adapt to the changing regulatory environment.
While challenges exist, the opportunities presented by the CBN’s new policies are substantial.
Navigating this terrain requires a proactive approach, with VASPs collaborating with legal experts to ensure compliance while seizing the newfound legitimacy and potential for growth in the Nigerian cryptocurrency sector.
Disclaimer: This article provides general information and does not constitute legal advice. Consult with a Nigerian cryptocurrency lawyer, a crypto competent lawyer in Nigeria or other legal professionals for advice tailored to your specific situation.
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