The Central Bank of Nigeria (CBN) has reportedly suspended fintech companies from offering its BVN validation system. Fintech companies now can’t legally onboard new customers or must switch to services that don’t require identity checks, such as peer-to-peer services. The move affects every non-banking company that offers BVN validation services in the country.
CBN’s BVN Verification Ban
In Nigeria, the Bank Verification Number (BVN) is an eleven-digit number unique to each bank customer that acts as the universal ID in all commercial banks in Nigeria.
Nigerians who have bank accounts each have a unique BVN tied to personal details such as addresses, phone numbers, fingerprints, etc.
The CBN AML/CFT Regulation of 2018, allowed Banks and other companies to use Bank Verification Number (BVN) as forms of identification for users who wanted to open an account.
The verification helped in checking money laundering, fraud, or other illegal transactions. However, with the suspension of BVN, other non-banking players have lost access to the most comprehensive means of identity verification in Nigeria.
Reportedly, the BVN Resolve Service went offline from April 8. Even though the Central Bank of Nigeria has not disclosed the reason for this move, a possible reason could be to drive NIN registration and make it the central verification service in the country.
Crypto Companies to be Affected by the BVN Ban
While Nigerians wait for the government to install a revamped identity system, the move signifies yet another hurdle for cryptocurrency firms.
A lot of people haven’t switched to the new NIN system and fintech companies don’t have the tools to query the new database, says Oluwaseun Opeyemi, a lawyer in Nigeria’s capital Lagos, adding:
“The timing of this move couldn’t be worse, especially given all the recent regulatory obstacles that fintech has faced this year, like the ban on banks dealing with crypto.”
This leaves fintech companies in a tough place, said Danny Oyekan, CEO of crypto investment firm Dan Holdings and social payments app Coins App, adding:
“How do startups verify the identity of their users without the BVN verification?”
Until the new NIN system takes off, fintechs will likely have to wait. With cryptocurrency companies, already struggling under Nigeria’s directives against them, the wait might be even longer.