The Central Bank of Nigeria (CBN) has issued a letter instructing banks and financial institutions to identify and close the accounts of cryptocurrency trading entities. The directive takes effect immediately, and constitutes “severe regulatory sanctions” on financial institutions that do not comply with the regulations.

Bank action immediately

After the letter was issued, some banks and other financial service providers immediately began to comply with the directive.Binance CEO Changpeng Zhao Tweet His company has received a message from a Nigerian partner confirming that “Naira’s deposits and withdrawals will be affected.” Quidax, Buycoins Africa and Bundle and other cryptocurrency startups have all stated that they will comply with the directive.

The Central Bank of Nigeria ordered a 97% reduction in remittances through traditional corridors, closing the bank’s encrypted customer accounts

At the same time, the Nigerian cryptocurrency community is angry about the directive, and many people call the decision a retrogression. Senator Ihenyen, Stakeholder Chairman of the Blockchain Technology Association of Nigeria (SIBAN), said that CBN needs to explain the decision, especially after the letter briefly “disappeared” on the CBN website. At the time of writing, a revised version of this letter appeared instead of the original typo.

The Central Bank of Nigeria ordered a 97% reduction in remittances through traditional corridors, closing the bank’s encrypted customer accounts

Lazy decision

At the same time, Ihenyen said that it is “pathetic” for banks and other financial institutions to simply block customers based on CBN letters. The president of SIBAN also suggested that CBN may not have “the statutory or regulatory power to only order banks to refuse to provide banking services to someone or the entire emerging industry”.

Ihenyen continued:

As far as I know, CBN can only regulate how to provide banking services to these people by applying risk management (such as KYC, AML/CFT regulations). Unlike the January 2017 letter, the total prohibition is arbitrary, illegal, irresponsible, and quite lazy with all due respect.

Although some commentators believe that CBN has only recalled its directives since 2017, Ihenyen said this view is “wrong”. The president of SIBAN, who is also a lawyer, said, “The 2017 directive does not approve of cryptocurrency transactions in Nigeria and completely restricts banks and other financial institutions from conducting cryptocurrency transactions.”

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However, the same 2017 directive “provides free space for the same banks and financial institutions to provide banking services to cryptocurrency exchanges and traders under the conditions of applying KYC/AML policies.” The latest directive is different from the 2017 directive. Directive, “It is completely prohibited for banks and other financial institutions to provide banking services to persons involved in cryptocurrency transactions and entities involved in cryptocurrency transactions.”

Decline in remittance inflows

Although it is unclear what prompted the sudden CBN decision, there is speculation that the central bank is fighting back against the industry, which may reduce its influence. Nathaniel Luz, the leader of Nigeria’s Dash, agrees with this view. Luz explained to news.Bitcoin.com that the decline in remittances (an important source of foreign exchange) may be one of the reasons.

The Central Bank of Nigeria ordered a 97% reduction in remittances through traditional corridors, closing the bank’s encrypted customer accounts

Such as data Data from Nairalytics shows that remittances sent to Nigeria via traditional corridors dropped from US$2.05 billion in January 2020 to US$54.4 million received in September of the same year. Luz believes that because many Nigerians are now turning to cryptocurrency-based remittance channels, CBN is now rebelling against this latest directive.

Others still speculate that the CBN order may be an attempt to prevent the repetition of protests led by the Endsars movement. When the authorities tried to suffocate the protests by freezing Endsars’ bank accounts, the protest leaders began demanding donations in Bitcoin.

At the same time, some cryptocurrency influencers stated that they wanted to contact CBN regarding the directive, which appeared to contradict the position taken by the Securities and Exchange Commission (SEC), another Nigerian regulator. At the time of writing, CBN has not issued any other statements. As more information becomes available, News.Bitcoin.com will provide updates.

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What do you think of this decision of CBN? You can share your thoughts in the comments section below.

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