Recently, the Central Bank of Nigeria (CBN) fined 3 commercial banks (Stanbic IBTC, Access Bank and the United Bank for Africa (UBA), for flouting its crypto currency trading restriction issued a year ago. According to the Apex Bank, some of the violations carried out by the above mentioned banks include;
- Operating accounts used for crypto trading
- Failure to close customer’s accounts, etc.
In 2021, the Central Bank of Nigeria gave a directive to all commercial banks and financial institutions to close all customer accounts operating with or trading cryptocurrency. In 2017, the apex bank had also issued a circular to commercial banks, directing them not to use, hold, trade and or transact in cryptocurrencies. Their basis for this directive has been financial safety, as most crypto users thrive on anonymity and thereby giving room for conducting illegal activities such as; money laundering, tax evasion, purchase of arms and weapons, sponsoring terrorism etc.
The above turn of events has reawakened a looming question with respect to crypto currency transactions in Nigeria which is; is cryptocurrency illegal in Nigeria?
This question is particularly important owing to the fact that Nigeria currently records a high amount of many crypto related transactions in spite of the ban.
ARE CRYPTOCURRENCY TRANSACTIONS ILLEGAL IN NIGERIA?
Upon studying the circulars issued by the CBN, it is safe to infer that the latter did not out rightly ban crypto currency/ cryptocurrency transactions in Nigeria as one would have to outlaw crypto exchanges and shut down the Internet to achieve that which is impossible to achieve.
What the Central Bank did however, was to place restrictions by cutting the link between crypto exchanges and their users.
To explain this in simple terms; Prior to the CBN restriction, if Mr A wanted to effect a transaction using cryptocurrency in Nigeria, he would effect such transaction using crypto exchanges such as Quidax. In order to fulfil Mr A’s request, Quidax would effect the conversion and flow of funds using a bank or payment company. By removing banks and other financial institutions, Mr A may not be able to carry out his transaction using his bank. He is therefore faced with an option of a direct transaction between himself and another person who wishes to transact with cryptocurrency.
Moreso, there is another angle to addressing this issue which is the ruling of the Abuja Federal High Court delivered by Justice Taiwo O Taiwo on 18th October 2021 in Suit number FHC/ABJ/CS/822/2021.
In the above ruling, it was held that the CBN circular issued on 5th February 2021 and referenced as BSD/DIR/PUB/LAB/014/001 is not a law and that the CBN lacks the authority to declare trading of cryptocurrency illegal.
In the above case, Risevest Technologies brought and application before the Court urging it to set aside an existing order freezing its Bank account on grounds of violating the directives of the CBN as contained in the circular referred to above.
In the words of the court;
The law is trite that any conduct that must be sanctioned must be expressly stated in a written law.”
“Being unknown to law, circulars cannot create an offence because it was not shown to have been issued under an Order, Act, Law or Statute.”
Furthermore, by virtue of Section 36 (12) of the Constitution of the Federal Republic of Nigeria as amended, a person cannot be convicted of a criminal offence except such offence is defined and penalty prescribed a written law. The Constitution defines a written law as either; An Act of the National Assembly, Law of a State, and subsidiary legislation or instrument.
The implication of the above ruling is that crypto trading transactions are not illegal for now as their is no law of the National Assembly or State House of Assembly enacted to that effect.
In spite of the restrictions placed with respect to crypto transactions, Nigeria remains one of the largest market with an active number of crypto users.
On the other hand, with the slow procedures for enacting laws in Nigeria, it might take a lot of time on the part of the Government to criminalise Crypto transactions.
In addition, a superior court of record may overturn the ruling of the Federal High Court in the matter stated above.
Which ever be the case, it is hoped that Nigeria would someday follow the lines of other countries that have embraced cryptocurrency to regulate the sector and harness the opportunities that come it.
If you are looking to set up your crypto exchange platform or you need further clarification in this regard, you may reach out to us, and we would be happy to assist you.