In a bid to soften the hearts of the Central Bank of Nigeria (CBN) and other regulators towards them, cryptocurrency exchanges in Nigeria are ramping up self regulation as they have commenced stepping up Know Your Customers (KYC) and background checks for users
Self-regulation in the context of exchanges is the establishment of guidelines and a code of conduct for market participants to operate businesses within the ecosystem. Those guidelines span a broad spectrum, from knowing your customers (KYC) to maintaining transparency to ensuring security against hacks.
“They also have to agree to provide complete and accurate information when opening a Binance account and agree to timely update any information they provide to Binance to maintain the integrity and accuracy of the information.”
The guidelines employed by crypto exchanges often align with elements defined by the International Organisation of Securities Commissions (IOSCO) in a 2000 paper. The elements include transparency and accountability, contractual relationships, and coordination, and information sharing.
Another exchange Luno noted that “We are now required to comply with Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) legislation in several of the countries we operate in. Where that’s not yet the case, we have clear guidance from the Financial Action Task Force (FATF) to measure our approach against.”
The London-based exchange said it applies robust AML and CFT controls that, wherever possible, are based upon the laws and regulations that apply to the financial services industry.
Local exchange, Quidax said its commitment to maintaining the best standards of KYC and AML is to prevent the abuse of its products and services for money laundering.
BuyCoins also said it has been proactive about setting up KYC and AML frameworks to limit the extent to which its users can perpetrate fraud. Prior to trading on the platform, they are required to undergo an effective yet user-friendly verification process involving the submission of their Bank Verification Number (BVN), phone numbers, and other legitimate forms of identification (i.e. international passport, National Identity card, etc.)
Crypto traders said the use of BVN and other forms of ID shows an alignment between crypto exchanges and the Central Bank of Nigeria when it comes to the safe and ethical movement of money. A trader who craved anonymity noted that the initiative that Nigerian crypto exchanges have taken to ensure that users are trading safely and in compliance with general anti-money laundering policies indicates a clear readiness to cooperate with national regulators.
Nigeria’s vice president, Professor Yemi Osinbajo had last month noted that, the most sensible approach to the market is a robust regulation since it is impossible to enforce a total ban.
“Cryptocurrencies in the coming years will challenge traditional banking, including reserve banking, in ways that we cannot yet imagine, so we need to be prepared for that seismic shift,” Osinbajo said in a video posted on his official Twitter handle.
They also have to agree to provide complete and accurate information when opening a Binance account and agree to timely update any information they provide to Binance to maintain the integrity and accuracy of the information.
The CBN had said the directive became necessary to protect the financial system and the generality of Nigerians (including the youth population) from the risks inherent in crypto assets transactions. The regulator claimed the risks have escalated in recent times and have dire consequences for the integrity of the financial system and financial stability.