Nigeria blocks bank accounts in renewed crypto onslaught

With the unannounced closure of bank accounts belonging to individuals involved in peer-to-peer trading, concerned crypto traders say Nigeria’s central bank may have activated the next phase of its campaign against the cryptocurrency market.

Some affected Nigerians say there was no prior notification from their banks that such action was to be taken.

In a memo sent by a tier II bank to staff members, it warned against helping crypto traders and promised to carry out disciplinary measures on staff that fail to report an account used for crypto services. It, therefore, mandated every staff member to monitor all accounts and the transactions carried out to ensure they are in line with the directive of the central bank.

A 20-point guideline released by the bank highlights ways staff can effectively keep watch over accounts suspected to be involved in crypto activities. A few of the policies include reporting accounts with massive amounts of payments, accounts acting as Bureau de Change without approval, among other things.

Some customers of banks like FCMB, Kuda, Access Bank, GTBank, Zenith Bank have been issued letters regarding the closure of their accounts on suspicion of crypto trading. In one of the letters BusinessDay saw, the bank cited the central bank’s regulation/circular of January 12, 2017, and February 5, 2021, which prohibited institutions and individual accounts from dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges.

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The cryptocurrency market in Nigeria has had a torrid history with regulators and financial institutions despite widespread attraction. Earlier in the year, Nigeria emerged as the country with the largest volume for peer-to-peer cryptocurrency transactions in Africa and second in the world. But Nigeria’s financial regulator appears unimpressed by the potential of the market but rather chose to view it as a threat to stable economic policies.

The regulator had in January 2017 warned financial institutions and Nigerians not to get involved in digital assets. The same year the apex bank kicked off its research into Central Bank Digital Currency (CBDC). In February 2021, it issued circular restricting banks from providing any form of financial support to crypto businesses or crypto-related transactions. In November 2021, less than one month after it launched the eNaira, banks began closing accounts belonging to individuals suspected to have dealings in cryptocurrencies.

“Some of us have been pushing for regulation of space in Nigeria just like the vice president once said. But it seems the eNaira is launched to compete against the decentralized cryptocurrencies like Bitcoin and others,” notes Rume Ophi, a digital asset expert.

The renewed campaign against the crypto market in Nigeria comes at a time when the market is experiencing a bullish run as exchanges welcome Exchange Traded Fund (ETF). Crypto enthusiasts in the United States have been trying to get bitcoin-linked investment products approved for several years. Hence, the approval of the ETF offered by ProShares by the New York Stock Exchange (NYSE) marks a long-awaited milestone for the market.

The market also welcomed a new endorsement from Bank of New York Mellon Corp., an investment banking services holding company. The financial institution said it would hold, transfer, and issue bitcoin and other cryptocurrencies for institutional customers.

The market has since seen the price of bitcoin and other cryptocurrencies surge to new all-time highs (ATHs). Bitcoin traded above $68,000 on November 9, 2021, for the first time. The total market capitalization of the crypto market currently stands at $2.94 trillion.

While the surge in prices of cryptocurrencies is a major attraction for many Nigerian investors, the financial regulator has a different plan. It is borrowing a playbook from China where all forms of cryptocurrency activities are banned and citizens are encouraged to use the country’s CBDC for cashless transactions.

Gaius Chibueze, CEO of Abit Network, a firm that provides cryptocurrency services and owns a token known as Tatcoin, confirmed on Thursday that a Nigerian bank closed his account.

“Sad that my naira account I use in supporting my family in Nigeria was blocked by the CBN yesterday (Thursday),” he said on social media. “I have always said one of the ways to beat the banks is for more businesses, both small and big, to accept crypto for purchases, even USDT. If I can pay my Uber, buy food, buy drugs, buy cars, pay for a vacation, etc., in crypto like Tatcoin, why do I need fiat?”