Interesting times are ahead for crypto in general. From price fluctuations to easing regulations and new use cases, a lot is happening. In this article, we portray the timeline of crypto regulation in Nigeria.
This should allow you make your forecasts, and hopefully understand what the existing condition is.
What are Crypto Regulations?
Crypto regulations are simply crypto-related rules and guidelines. They are laws set to direct the complex crypto ecosystem. Investors, crypto service providers, and governments are all at the receiving end of this.
Typically, crypto regulations can be broad or narrow.
They are broad in cases where the entire ecosystem is being addressed. Otherwise, they are narrow. These narrow regulations seek to resolve specific issues. An example might be licensing.
The State of Crypto Regulations Worldwide
Certain regions have advanced crypto regulations. Western countries like the US top this list. Others such as Germany and South Africa are making significant progress.
In the same context, a few regions are completely lost. These are jurisdictions which do not recognize cryptocurrencies. By implication, they don’t have any regulations on the subject.
The realization here is that global crypto regulation is uncoordinated. Some countries/policies are far behind. Some are leading the way. The rest are stalling.
Industry leaders and enthusiasts are not happy with this. They are calling for uniformity. They want things to change.
Thankfully, their cries have not been in vain.
In the last few years, more and more regions have found a common ground. An example is with AML-CFT measures. Countries like Switzerland, Singapore, and Japan are all in on it.
They agree that Anti-Money Laundering and Counter-Terrorism Financing are concerns. As a result, they’ve fostered adherence to the FATF’s Travel Rule. A larger number of countries also employ robust KYC processes.
Why Crypto Regulations are Important
Here, we want to explain why crypto regulations are important. We can assure you that there are many reasons.
Increased Blockchain Security:
Regulators analyze the situation of blockchain security. With that, they come up with protective regulations. This helps to keep the blockchain ecosystem secure.
Security regulations can come in various forms. An example is requiring blockchain developers to improve security features.
Enforcing blockchain security makes things safer for investors. Service providers also get to enjoy some benefits. This is in the fact that their
Efficient Markets:
There’s something interesting here. Research finds that regulated digital coins have efficient markets. And why wouldn’t they?
Among other things, crypto regulations help to create transparency. Information on the performance of a cryptocurrency and the community behind it can be kept public. In turn, investors will know what they are engaging with.
The openness allows for good and sound decision making from market players. Their engagement will be solid and unwavering. The market will earn trust. Finally, this trust will lead to realize increased participation.
It is clear how this creates a cycle that is beneficial and rewarding.
Nigeria’s Crypto Regulation Timeline
There was no major crypto regulatory activities in Nigeria until 2021. However, once the regulations began, it came down heavy. Here’s a timeline of crypto regulations in Nigeria.
2021
February 2021
A crypto price boom occurred in 2020. Bitcoin and Ethereum peaked to all-time-high (ATH) values. At the same time, coins like XRP recorded significant increase. The global crypto market was on steroids.
It was a favorable time for nearly all crypto owners and traders. However, on February 5, 2021, Nigerans got the unexpected. The federal government placed an immediate ban on cryptocurrencies.
The ban was executed through commercial banks. It came in a clear message. All crypto-related accounts within financial institutions were to be suspended.
Four days after its directive, the CBN launched an investigation. This was to find which financial institutions have serviced crypto traders.
The backlash from the Nigerian public was obvious. Many tweeted and lended various opinions to the media. On February 11, the Senate responded by inviting key elements to a meeting.
Participants discussed on the pros and cons of crypto for Nigeria’s economy.
Not long after, on February 18, a new voice emerged. It was that of the International Monetary Fund (IMF) backing the CBN’s decision. According to the agency, crypto could be used for money laundering.
More events went down in the month of the ban. On February 22, SEC Nigeria demanded regulation for cryptocurrencies. The Vice President at the time also supported the view. He insisted on the development of a regulatory framework rather than a ban.
March 2021
On March 21, the CBN made an announcement regarding its crypto ban. The statement claimed to clarify the decision. It stated that individuals could still trade or own crypto but not through local banks or fintech.
April 2021
The SEC made a positive announcement on April 15. It mentioned that there were ongoing discussions with the CBN. This discussion was to find a common ground on regulation.
April 26, 2021, the Economic and Financial Crimes Commission (EFCC) issued a statement. Their statement advised Nigeria to avoid Bitcoin investments.
July 2021
Three months went by and then some more crypto related news. This time, it was regarding the government’s involvement.
Nigeria’s Central Bank (CBN) was on track to release a stable coin. It would be named eNaira and it would standout from regular crypto.
October 2021
History was made on October 25. Nigeria became the first African country to launch a digital currency.
2022
April 2022
As we know, regulation and enforcement go hand in hand. On April 7, the CBN took measures against 7 local banks. The apex bank did so through a fine worth over NGN1.3 billion.
Each bank was found to have disregarded the crypto regulation made in early 2021. institution.
May 2022
Digital assets may be considered as securities, commodities, or currencies. Their classification may depend on purpose, usage, and context.
On May 15, the SEC revealed that it sees digital assets as securities. It also went forward to release some regulations. These rules bordered on the storage and transfer of these assets.
December 2022
The federal government, through the then finance minister, revealed plans to tax crypto. This was made public on December 2. It came to light after a meeting of the National Economic Commission (NEC).
The NEC deliberated over a new finance bill. This bill comprised of five aspects. They are tax equity, climate change, economic growth, tax incentives’ reform, and tax administration.
2023
May 2023
Nothing happened between December 2022 and Q1 2024. However, on May 28, the new finance bill became active.
President Muhammadu Buhari had the honor of signing the bill into law. It took effective immediately. By this, the government would be charging 10% taxes on crypto earnings.
December 2023
Many months passed. Eventually, on December 23, the Nigeria government made a bold move. This involved upturning the existing ban on crypto.
The decision was welcomed with open hands by enthusiasts across the country. It had been over 2.5 years since the ban was initiated. With the new regulation, investors were hopeful for the future.
2024
January 2024
Things quickly got better for the Nigeria crypto community. This was as the Securities Exchange Commission (SEC) made fresh announcements. The message from SEC described lighter restrictions for crypto-related activities.
May 2024
On May 21, the Securities Exchange Commission (SEC) announced a regulatory amendment. This came alongside an onboarding program for VASPs. The amendment will see a change of the rules for digital assets issuance, offering platforms, exchange and custody.
Conclusion
The downside to ignoring innovation is getting lost for coming on the scene late. Nigeria, like many other African countries, now painfully realizes this.
The Nigerian government was forced to give up its stringent regulatory stand. In a statement from the CBN governor, regulators worldwide are having a shift of attitude. And why wouldn’t they? The crypto industry is already worth over USD1 trillion.
Despite bans and bottleneck regulations, the entire system is growing. In Nigeria, locals reportedlyhyperlink Kucoin traded USD56.7 billion between July 22 and June 2023. That happened while the ban was still in effect.
The conclusion here is the need for regulators to read potential. Also, they must understand possibilities and correctly weigh what works and what doesn’t. All in all, there’s no straight path to regulation but those overseeing it must do their very best.