The Nigerian Central Bank has modified its position on cryptocurrency assets within the nation and requested that banks ignore its previous prohibition on cryptocurrency transactions.
This is in accordance with a circular signed by Haruna Mustafa, Director of the Financial Policy and Regulation Department of the apex bank, and dated December 22, 2023, with reference number FPR/DIR/PUB/CIR/002/003.
The circular is headed “Guidelines on Bank Account Operations for Virtual Assets Service Providers (VASPS) to All Banks and Other Financial Institutions.”
Global developments, according to the top bank, have demonstrated the necessity of regulating cryptocurrencies.
The statement read, “The CBN, in February 2021, issued a circular restricting banks and other financial institutions from operating accounts for cryptocurrency service providers due to the risks and vulnerabilities associated with money laundering and terrorism financing (ML/TF) as well as the lack of regulations and consumer protection measures inherent in their operations.”
Global trends, however, have demonstrated the necessity of regulating the operations of virtual asset service providers (VASPs), which offer cryptocurrency and other digital assets. In response to this advancement, the Financial Action Task Force (FATF) revised Recommendation 15 in 2018 to mandate the regulation of VASPS in order to stop the improper use of virtual assets for ML/TF/PF.
Furthermore, VASPs are recognised as a component of the definition of a financial institution under Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022.
Furthermore, in order to establish a legal framework for their activities in Nigeria, the Securities and Exchange Commission published Rules on Issuance, Offering, and Custody of Digital Assets and VASPs in May 2022.
Given the above, the CBN issuing this advisory to financial institutions that fall under its regulatory scope to help them manage their banking relationships with VASPs in Nigeria.
The highest banking authority stated that the aforementioned guidelines, which were cited as FPR/DIR/GEN/CIR/06/010 of January 12, 2017, and BSD/DIR/PUB/LAB/014/001 of February 5, 2021, are no longer in effect.
It further confirmed that the keeping, selling, and/or transaction of virtual currencies on the account of banks and other financial institutions remains forbidden.
It further stated that all banks and other financial organisations must adhere to its new guidelines right away.
The central bank warned banks in a circular dated February 5, 2021, under reference number BSD/DIR/PUB/LAB/014/001 that it was against the law to deal in cryptocurrencies or process payments for cryptocurrency exchanges.
At the time, it required banks to identify individuals or organisations using their systems to engage in cryptocurrency exchanges and make sure that those accounts were cancelled.
