Nigeria’s Crypto Regulation Efforts Gain Momentum as Blockchain Firm Trains Compliance Specialists

Nigeria urged to enhance efforts in clarifying crypto regulation as blockchain company successfully trains fifth cohort

Nigeria is urged to strengthen crypto regulations to prevent financial crime

Last updated: February 12, 2024 13:11 EST | 2 min read

Nigerian regulators are gradually thawing to crypto

Nigeria is making strides in clarifying crypto regulation as a blockchain firm successfully completes training its fifth cohort of crypto compliance specialists. A&D Forensics, a leading blockchain intelligence service provider, offers a course that focuses on curbing financial crimes committed on-chain, including money laundering, hacking, and sanctions evasion. The training also covers crypto compliance laws in various jurisdictions.

According to Adedeji Owonibi, co-founder of A&D Forensics, the training is crucial in ensuring banks comply with recently passed guidelines for dealing with Virtual Asset Service Providers (VASPs). However, he believes that a more comprehensive regulatory framework is necessary to reduce the rate of financial crimes in Nigeria. At present, the legal status of VASPs, such as exchanges, remains uncertain, as their classification as money transmission institutions and the associated regulations are unclear.

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Owonibi emphasizes the importance of thorough vetting of VASPs by banks to detect any signs of criminal activity before opening accounts for them. Non-compliance could potentially implicate the banks as accomplices in proven criminal cases, as outlined by the guidelines from the Nigerian Central Bank.

As part of their training work, A&D Forensics has collaborated with law enforcement agencies and financial intelligence units. They have conducted cryptocurrency investigator courses for police officers and officers of the Economic and Financial Crimes Commission (EFCC). The firm’s efforts highlight the need for Nigeria to intensify its regulatory efforts by enacting comprehensive legislation.

Nigeria’s Incremental Path to Regulation

The Nigerian Central Bank (CBN) initially took a cautious stance on crypto in 2021 by banning crypto payments within the country. However, Nigeria made history by becoming one of the first central banks in the world to issue a central bank digital asset (CBDC) later that year.

While the ban presented significant challenges to the adoption of the eNaira CBDC, the CBN overturned it earlier this year. Simultaneously, the central bank introduced stringent requirements for Nigerian VASPs.

Under these requirements, VASPs can open bank accounts for digital asset transactions, but they are prohibited from carrying out cash withdrawals or clearing third-party cheques. Banks, on the other hand, are still not allowed to hold crypto and must submit comprehensive periodic reports to the CBN regarding their VASP account holders. They are also required to conduct thorough risk assessments on their crypto clients to determine transaction limits for each account.

To combat financial crime, the CBN mandates that financial institutions conduct due diligence and continuous verification of addresses.

Q&A

Q: What are Virtual Asset Service Providers (VASPs)? A: VASPs are entities that provide services to facilitate the exchange, transfer, or storage of virtual assets, such as cryptocurrencies. Examples include cryptocurrency exchanges and custodial wallet providers.

Q: Why is a comprehensive regulatory framework necessary for crypto in Nigeria? A: A comprehensive regulatory framework can mitigate financial crimes, ensure compliance with international standards, and provide clarity for industry participants regarding their legal obligations.

Q: Are banks in Nigeria allowed to hold cryptocurrencies? A: No, banks in Nigeria are currently prohibited from holding cryptocurrencies. They can only open accounts for VASPs to facilitate digital asset transactions.

Future Outlook and Recommendations

The progress made by Nigeria in training crypto compliance specialists and implementing regulatory guidelines is a positive step towards fostering a safer and more transparent crypto ecosystem. To further develop and nurture the crypto industry, Nigeria should continue its efforts to enact comprehensive legislation that addresses the legal status and regulatory requirements of VASPs. This will provide clarity to market participants and attract more legitimate players to the Nigerian crypto market.

Investors looking to enter the Nigerian crypto market should closely monitor the regulatory landscape and ensure compliance with the existing guidelines. It is also advisable to seek expert advice and conduct thorough due diligence before participating in any crypto-related activities in Nigeria.

For more information on crypto regulation and industry developments, follow reputable news sources and stay updated on the latest trends and insights.

References:

1. Nigerian regulators are gradually thawing to crypto
2. Recently passed guidelines on dealing with Virtual Asset Service Providers (VASPs)
3. Significant hurdles to the adoption of the eNaira CBDC
4. CBN overturned the crypto payment ban
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