CBN Ban on Cryptocurrencies: Legal Issues and Effect – Sun Natha-Alade Partners (SNATHAP)


The recent Central Bank of Nigeria’s directive BSD/DIR/GEN/LAB/14/001 prohibiting commercial banks and other financial institutions from transacting and allowing payments to be made through their platforms has thrown the whole country into a frenzy. While the CBN justified the controversial directive by alluding to the volatility, anonymity and crime-enhancing nature of crypto-currencies, many Nigerians have accused the apex financial regulatory body of being backward and not in tune with global technological trends and innovations.

To assist us in appreciating the subject of discuss, the following questions must be satisfactorily answered; what are cryptocurrencies? What are the regulatory frameworks of cryptocurrencies in Nigeria? What are the implications of the new CBN directive on traders, fintech and other stakeholders in the global financial market? Was CBN ban outright on all fronts? Is it now illegal to transact cryptocurrencies in Nigeria?


Do you often think of cryptocurrencies as your normal every day fiat currencies that are issued by the central banks of countries to serve as legal tender? emphatically, the answer is no! There are quite some similarities and major differences between money and cryptocurrencies:- Fiat currencies are tangible and issued by the governments through their central banks and/or centralized government system, hence a recognized legal tender within an entity of State / Country. Acceptable monetary legal tenders are often centralized and issuance of same is based on directives and/or regulations of government of every Countries. Cryptocurrencies on the other hand are intangible digital currencies powered by the block chain technology; hence, more of private, more like a security and means of exchange between would be ‘transactors and transactees’. The sole language of the speakers in the category is ‘understanding and acceptability’ of same as security and/or means of exchange of goods and services, whether it is recognized by government, other individuals or not.

Blockchain technology is a decentralized digital ledger, also known as Decentralized Finance (De-Fi), spread across several computers that manages and records transaction.

Just this week, the world’s richest man on earth Elon Musk bought Bitcoin worth $1.5 Billion, he did not stop at that, He further announced his plans to start accepting cryptocurrencies as means of payment for his company’s products in the near forseeable future, the sky seems to be the starting point for cryptocurrencies by massive adoption from several organizations and stalwarts round the world.

It is worthy of note that, according to, about 6,700 different cryptocurrencies are traded publicly on daily basis. Analysts have also indicated that more cryptocurrencies will be created within the next decade.


The saying that law usually lags behind technology is more applicable to Nigeria, despite the fact that Nigeria traded the second largest volume of bitcoin with a market capitalizationof $864.79 Billion, Bitcoin is the most popular and most valuable cryptocurrency  on the popular worldwide bitcoin marketplace ‘paxful’, and the fact that her bitcoin trade value has been increasing at the rate of 19% since 2017, Nigeria has no robust regulatory framework for cryptocurrencies. This is a strong testament to the low quality of the caliber of people occupying the National Assembly that are saddled with the constitutional responsibility of making laws, rules and regulations for the country.

It took the ingenuity of Nigerian Securities and Exchange Commission to issue a prima facie regulation on cryptocurrencies pursuant to the powers granted to it by the Investment and Securities Act. By the regulation dated September 14, 2020 every crypto asset will be treated as securities, the regulation prohibits stakeholders from dealing in cryptocurrencies without getting a tacit approval from the Commission.

It is worthy of note that cryptocurrencies though categorized as securities, actually transcends securities, having gained popularity in the 21st century as means of exchange, buying and selling of commodities; in most instance, securities need to be converted to fiat currency to be so used for purpose, this is not always so with cryprocurrencies as most persons and individual has accepted its use in recent time for almost all purposes. This in itself is the major conflict between the Central Bank of Nigeria and the Securities and Exchange Commission, it is the contention of the CBN that it is the only body saddled with the responsibility of regulating legal tenders by law within the territory of Nigeria.

It is our humble submission that any of Investment and Securities Act, the CBN Act or the Banks and Other Financial Institution Act (BOFIA) can be amended accordingly to set records straight, as was done in Estonia where the Money Laundering Act was amended to accommodate cryptocurrencies and as being done in recent time by many developed worlds, many of who are now setting up regulatory legal frameworks on cryptocurrencies everyday without ruling out its relevance and value to the current age and future. It is our opinion, that instead of an outright ban, it is better that a new legal regime that will specifically target and take care of the peculiarities embedded in usage of cryptocurrency be put in place by necessary governmental bodies. 


Anonymity and security are the strengths and weaknesses of cryptocurrency. Supposing two different kidnappers opted to collect ransom differently, while one opted for a direct bank transfer, the other opted to be paid through cryptocurrency, the former would be easily tracked while the later will be very difficult to track.

The anonymity feature of cryptocurrency has made it the ideal tool to launder money across several countries, buy illicit drugs in the dark market, fund terrorism without the preying eyes of the Central Banks.

The facts that cryptocurrencies are also not issued by the central banks of any country, bank accounts are not required to transact them and it can affect the money supply in the economy. The CBN justifiably feels that it is eroding its powers making it a threat to the status quo.

This threat was brought to the fore during the recent #EndSARS protest where funds were raised using cryptocurrencies to bypass governmental restrictions aimed at nipping the protest which may have skyrocket into a revolution in the bud.


The new CBN directive is expected to affect the demand for cryptocurrency in the Nigerian market, daily traders will encounter difficulties in processing payment and fintech companies like Luno and paxful will lose their share of commission on crypto transactions.

With a relatively low inflow of foreign direct investment because of unstable governmental policies, lack of foreign exchange, a weak Naira currency, huge infrastructural deficit among other issues into the country, Nigeria should be thinking of creative ways to attract fintechs and the investments they could bring and not discourage them from entering an already troubled economy reputed to be one of the poverty capitals of the world.

It is our humble observation that traders and other cryptocurrency stakeholders can bypass the recent CBN directive by accepting payments for crypto transactions through third party mediums like paypal which unfortunately is difficult to access in Nigeria. We remain hopeful that fintech companies will inculcate new payment methods to bypass the unfortunate directive on their platforms.

It must be noted that since the central bank has the statutory power to issue lawful directives to financial institutions within Nigeria entity as to means of operations and dealings, the recent circular banning the financial institution towards aiding or facilitating the exchange of cryptocurrencies in Nigeria, (though challengeable in court of law) is deemed as the standard of operation for all banks and other financial institutions on issues relating to cryptocurrencies in Nigeria.


While it is true that cryptocurrency market is volatile, prone to fraud and has also been banned in in about seven countries, and in some cases with modifications and regulations, Nigerian government should not throw the child away with the bathing water. In line with the massive benefits that could be derived from cryptocurrencies by an already troubled economy, we observe that of all countries in the world, Nigeria needs the crytocurrency market the most to boost and strenghten its economy; hence, a robust regulatory framework and regime is all that is needed to protect both the citizens and government from its disadvantages.

It must be noted that except and only if the government has some ulterior motives in issuing the unfortunate directive through the CBN there is no problem arising from cryptocurrencies that could not be checked as has been done in several countries. It should be noted that dealing in foreign exchange, shares and other securities are also prone to fraud and are highly volatile.

In a nutshshell, what is the effect of CBN directive? Does the CBN directive BSD/DIR/GEN/LAB/14/001 serve as outright ban on cryptocurrencies in Nigeria? Absolutely not! Several crypto wallets and transactions between consenting individuals or organizations are not banned, a such, the CBN would act ultra vires its powers to attempt such ban. As it is today, only the assistance or facilitation of cryptocurrencies transactions by financial institutions, such as conversion or exchange of cryptocurrencies to local or foreign cash (as an institution or through third-party brokers partnership with financial institutions) are banned.

Trade safely.

Contribution: Ibrahim Bolakale Omoleke (Associate Partner);

Contributor & Editor: Richarmond O. Natha-Alade (Executive Partner)

Sun Natha-Alade & Partners (SNATHAP)

Legal Practitioners and Financial Law Experts

08155377099, 08064961554

Leave a Comment

Your email address will not be published. Required fields are marked *