The futures of dozens of Nigerian startups operating in the cryptocurrency space are in doubt after the Central Bank of Nigeria (CBN) ordered all banks to close any accounts transacting with cryptocurrencies.
In a letter dated Friday, February 5 and signed by Bello Hassan, director of banking supervision, the CBN said it was reminding banking institutions that “dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited”.
It said banks should work to identify people or entities transacting with cryptocurrency or operating cryptocurrency exchanges on their platforms, and “ensure that such accounts are closed immediately”. Breaches of the order would face “severe regulatory sanctions”.
Why is the CBN cracking down on crypto? Bitcoin especially played a big role in the #EndSARS protests in Nigeria last year, and like many nations Nigeria is debating how to regulate or tax the growing cryptocurrency space. However, this new measure is draconian, and puts the futures of many startups – and the growing Nigerian cryptocurrency space in general – in doubt.
“Withdrawal services remain normal and will continue to be processed but might take slightly longer time than usual,” the statement said.
Nigerian crypto-based social payments app Bundle, meanwhile, which launched last year with funding from Binance, said in a message to users that trading would continue as usual and that its users’ cryptocurrency remained “totally safe”.
“However, due to the notice, our naira payment partners have decided to suspend crypto-related payments for now, so we have disabled naira deposits until this is resolved. We’re sorry for any inconvenience this may cause you,” it said.
“Withdrawals may take longer than usual but we will make sure all transactions are processed and we will keep you updated if anything changes.”
Bundle’s founder Yele Bademosi, who has also invested in a handful of crypto startups via his VC firm Microtraction, said the “disappointing” memo had the potential to “cripple” the nascent cryptocurrency industry, which he said “has to potentially have a significant impact on our economy”.
It is not, however, “the end of the world”, Bademosi said.
“We will do our best to educate and engage with the regulators and our payment providers to see how we can hopefully come to a reasonable resolution on the matter,” he said.