Nigeria's central bank has reversed its ban on cryptocurrency transactions, citing global trends that emphasize the necessity of regulating such activities, as stated in its recent circular.

In May of the previous year, Nigeria's Securities and Exchange Commission (SEC) established regulations for digital assets, indicating the country's attempt to strike a balance between an outright ban on crypto assets and their unregulated usage.

The Central Bank of Nigeria (CBN) had initially imposed the ban in February 2021, preventing deposit-taking financial institutions from engaging in transactions with or operating cryptocurrency exchanges.

Despite the fluctuating prices of virtual assets, cryptocurrency transactions in Nigeria have continued to rise, with a 9 percent increase reported by Chainalysis in September.

In order to ensure compliance, banks must now acquire the Bank Verification Number (BVN) of all directors and owners of the crypto companies they serve. The guidelines also mandate rigorous Know Your Customer (KYC) measures that Virtual Asset Service Providers (VASPs) must follow before establishing a banking relationship.

In October, a group of Nigerian blockchain experts criticized the Central Bank's decision to prohibit cryptocurrency use in 2021. Adedeji Owonibi, the CEO of Convexity, commended the blockchain technology regime and criticized the Central Bank of Nigeria (CBN) for its failure to implement a favorable policy.

Owonibi praised the National Information Technology Development Agency (NITDA) for pushing the first National Blockchain Policy in May, a move designed to safeguard creators, investors, and users.

In a circular dated December 22, the CBN acknowledged the global need to regulate the activities of Virtual Asset Service Providers (VASPs), encompassing cryptocurrencies and crypto assets. The latest guidelines detail how banks and financial institutions should open accounts, provide designated settlement accounts and settlement services, and act as channels for forex inflows and trade for firms engaging in crypto asset transactions.