On Friday, August 23, 2024, Nigeria’s Securities and Exchange Commission (SEC) made history by issuing the country’s first-ever cryptocurrency licenses to home-grown exchanges Busha and Quidax. This move represents a significant milestone in Nigeria’s turbulent relationship with digital currencies, as the nation grapples with regulatory uncertainties and the broader implications of crypto adoption.
Nigeria’s journey to officially recognizing and regulating cryptocurrency has been fraught with contradictions and policy flip-flops. While the Central Bank of Nigeria (CBN) lifted its ban on banks dealing in cryptocurrencies in December 2023, the path to regulation has been anything but straightforward. In early 2024, the SEC and CBN explored the possibility of regulating peer-to-peer (P2P) transactions, yet by May of the same year, the CBN was instructing banks to block accounts linked to P2P crypto trading.
The challenges faced by crypto traders were starkly highlighted on August 23, 2024, when a high court in Uyo denied an application to unfreeze a Kuda bank account belonging to Patrick Okon, citing crypto-related transactions as the reason for the account restrictions. This case is just one example of how financial institutions are still hesitant to fully embrace crypto, despite the SEC’s recent licensing efforts.
In March 2024, amidst a deepening currency crisis, Nigerian financial regulators took a hard stance against the fintech sector. Prominent companies were barred from onboarding new customers for five weeks, while Binance, the world’s largest cryptocurrency exchange, faced severe scrutiny for allegedly manipulating the naira. Two of Binance’s executives were detained, and one, Tigran Gambaryan, continues to be embroiled in a protracted legal battle.
The SEC, which issued the licenses to Busha and Quidax, has also been vocal about its expectations for the industry. In several meetings held in May 2024, the SEC hinted that exchanges should block P2P transactions as a show of patriotism. Despite these mixed signals from regulators, banks and financial institutions remain cautious. According to sources within the banking sector, institutions are choosing to play it safe, opting to distance themselves from crypto-related activities until they receive clear directives from the CBN.
“The CBN has not openly accepted [crypto] yet,” a bank executive told TechCabal, speaking on condition of anonymity. Even though the CBN has technically lifted the ban on cryptocurrency dealings, banks are wary of embracing the SEC’s new licenses without explicit guidance from the CBN, their primary regulator.
This caution is further illustrated by the comments of Chike Okonkwo, the founder of blockchain startup Gamic, who has been in discussions with the SEC since 2019. Okonkwo questions the efficacy of the new guidelines, pointing out that retail traders still cannot freely list crypto in their banking transaction descriptions, despite the issuance of licenses.
Busha, one of the newly licensed exchanges, remains optimistic. A spokesperson for the company emphasized that the licenses represent a critical step forward for the industry, potentially fostering greater confidence among users and deepening the market. Busha also expressed readiness to comply with whatever “tight but effective regulations” the CBN might impose in the future.
Despite this optimism, the broader financial community continues to approach crypto with caution. A fintech executive, who preferred to remain anonymous, criticized Nigeria’s banking laws as being unfriendly to customers, noting that financial institutions retain the right to freeze any account suspected of illicit activity.
The central question remains: Are crypto trades legal in Nigeria? While the SEC’s issuance of licenses suggests they are, the CBN’s December 2023 directive and the ongoing hesitancy from banks imply that the situation is far from settled. Until the CBN provides unambiguous instructions, banks and fintechs are likely to continue their cautious approach, leaving Nigeria’s burgeoning crypto industry in a state of regulatory limbo.