The Central Bank of Nigeria recently uncovered that three banks in its jurisdiction—Access Bank Plc, Stanbic IBTC Bank, and United Bank—were conducting crypto transactions despite the ban that prevents them from doing so.
The central bank reacted by imposing hefty fines on the banking institutions, which in total add up to nearly $2 million, or 800 million nairas.
Access Bank Plc had to pay $1,202,733 (500 million nairas), followed by Stanbic IBTC Bank which paid $478,595 (200 million nairas), and lastly, United Bank for Africa had to pay $240,547 (100 million nairas).
Nigeria imposed said restrictions in February last year, when all accounts owned, used, or operated on behalf of cryptocurrency exchanges were ordered to be blocked.
Furthermore, all local banks were warned that failure to comply with the order would result in regulatory sanctions.
The CBN decided the ban was necessary after protests against the country’s Special Anti-Robbery Squad. According to the information that the bank was able to procure, the protestors were accepting Bitcoin donations.
Despite this, the bank did not ban cryptocurrencies themselves in Nigeria, as doing so would be too complex: it would essentially have to shut down the internet in the country and simultaneously outlaw crypto exchanges.
Nigeria Remains Second-Largest Country Based on Trading Volume
Due to the decentralized nature of cryptocurrency, and the fact that few crypto funds flow through the institutions that the central bank (or any other bank) can control, the central bank decided to prevent crypto exchanges from operating in the country by blocking their bank accounts.
For a time, it appeared that local financial institutions and banks respected the ban, although that did not stop Nigerian people from using cryptocurrencies. In fact, Paxful stated that Nigeria is responsible for the largest volume of crypto transactions outside of the United States.
The central bank knows this well, and after realizing that Nigerian people will continue using cryptocurrencies despite the measures, it decided to change its tactics. This led to the launch of e-Naira, Nigeria’s own CBDC.
However, similar to the situation in Venezuela, where the country’s president launched the oil-backed Petro coin back in 2018, the government’s cryptocurrency was ignored in favor of decentralized cryptos.
Nigerian Crypto Users have Turned to Alternatives
Local crypto exchanges have already found a way around the blockade by introducing peer-to-peer (P2P) exchanges for conducting their crypto transactions.
These exchanges allow users to connect to one another directly: buyers and sellers would use the platform to make the transaction, while the buyer would pay to the seller through other means. Once the seller confirms that the funds have arrived, their coins—previously put into escrow—would be released to the buyer.
The Nigerian central bank’s move is not quite as extreme as restrictive actions by China in 2021, but it is far from being crypto-friendly like El Salvador, which openly adopted Bitcoin as legal tender.
Countries like Nigeria, China, and others that are in a rush to launch CBDCs are clearly signaling that they want the benefits of crypto and blockchain, yet won’t allow the use of decentralized cryptos that they cannot have full control over.
Even so, cryptocurrency continues to spread throughout the world, virtually unfazed.
Cryptocurrency continues to expand its reach worldwide. Read about how over 170 service stations in South Australia will soon accept payment in crypto.
Another recent example is the addition of a popular memecoin to Bitcoin of America ATMs. Click here to find out which one made the leap into the mainstream.