Nigeria Moves to Legally Recognize Bitcoin Amidst Shifting Regulatory Landscape

The Nigerian government is reportedly set to pass legislation recognizing the usage of Bitcoin (BTC) and other cryptocurrencies as a means to conform to global financial practices. This progress follows an interview with Babangida Ibrahim, the Chairman of the House of Representatives Committee on Capital Markets.

The proposed amendment to the Investments and Securities Act 2007 aims to grant local securities regulators the authority to recognize cryptocurrencies and digital assets as valid capital for investment. Ibrahim emphasized the necessity for Nigeria to stay attuned to trends in capital markets, saying, “We need an efficient and vibrant capital market in Nigeria. For us to do that, we have to be up to date with global practices.”

This news comes nearly two years after Nigeria prohibited crypto activity in February 2021. At that time, the Central Bank of Nigeria (CBN) directed local crypto exchanges and service providers to halt operations and instructed banks to close the accounts of anyone found engaging in cryptocurrency trading activities. Ibrahim clarified that the newfound interest in legalizing cryptocurrencies is not merely a reversal of the ban; instead, it is an effort to establish a legal framework governing the use of digital currencies.

He added, “It is not about lifting the ban, we are looking at the legality: what is legal and what is within the framework of our operations in Nigeria.” Notably, the CBN noted at the time of the ban that many investors did not use local accounts, placing them outside CBN’s jurisdiction.

If passed, the new law will not only confer legitimacy on Bitcoin and other cryptocurrencies but will also specify the regulatory roles of the CBN and Nigeria’s Securities Exchange Commission (SEC) in relation to digital currencies.

In light of the proposed regulations, it’s worth noting that public interest in Nigeria’s central bank digital currency (CBDC), known as the eNaira, has been tepid, with adoption rates reported at less than 1% a year post-launch.

Despite the initial crackdown on cryptocurrency trading, Nigeria’s crypto adoption has proven resilient, with the country ranking second in Bitcoin trading volume just behind the United States in 2021. An April research study by CoinGecko also revealed that Nigerians were the most interested in cryptocurrency, driven by high inflation rates and economic challenges.

The Nigerian government is actively engaging in early discussions with Binance to create a crypto-friendly economic zone aimed at supporting blockchain and cryptocurrency businesses in the region.

Related: Emerging markets lead global adoption index: Chainalysis report