In a significant policy shift, the Central Bank of Nigeria has rescinded its previous prohibition on cryptocurrency transactions and has instructed banks to disregard the earlier ban.
The directive, outlined in a circular dated December 22, 2023 (Reference: FPR/DIR/PUB/CIR/002/003), signed by Haruna Mustafa, the Director of Financial Policy and Regulation Department at the apex bank.
Titled ‘CIRCULAR TO ALL BANKS AND OTHER FINANCIAL INSTITUTIONS GUIDELINES ON OPERATIONS OF BANK ACCOUNTS FOR VIRTUAL ASSETS SERVICE PROVIDERS (VASPS),’ the circular emphasizes the global necessity for cryptocurrency regulation, acknowledging evolving trends in the sector.
The circular reads, “The CBN, in February 2021 issued a circular restricting banks and other financial institutions from operating accounts for cryptocurrency service providers given the money laundering and terrorism financing (ML/TF) risks and vulnerabilities inherent in their operations as well as the absence of regulations and consumer protection measures.
“However, current trends globally have shown that there is a need to regulate the activities of virtual assets service providers (VASPs) which include cryptocurrencies and crypto assets. Following this development, the Financial Action Task Force (FATF) in 2018 also updated its Recommendation 15 to require VASPS to be regulated to prevent misuse of virtual assets for ML/TF/PF.
“Furthermore, Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022 recognises VASPs as part of the definition of a financial institution.
“In addition, the Securities and Exchange Commission in May 2022 issued Rules on Issuance, Offering and Custody of Digital Assets and VASPs to provide a regulatory framework for their operations in Nigeria.
“Given the foregoing, the CBN hereby issues this guideline to guide financial institutions under its regulatory purview concerning their banking relationship with VASPs in Nigeria. “
The apex bank noted that this new guideline supersedes its old ones referenced FPR/DIR/GEN/CIR/06/010 of January 12, 2017, and BSD/DIR/PUB/LAB/014/001 of February 5, 2021 on the subject.
It also affirmed that banks and other financial institutions are still prohibited from holding, trading and/or transacting in virtual currencies on their account.
It added all banks and other financial institutions are required to immediately comply with its new guidelines.
In its circular with reference number BSD/DIR/PUB/LAB/014/001, dated February 5, 2021, the apex bank reminded banks that dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges was prohibited.
At the time, it asked banks to identify persons or entities transacting in or operating cryptocurrency exchanges within their systems and ensure that their accounts were closed.