CBN Issues New Guidelines on Cryptocurrency Transactions in Nigeria
The Central Bank of Nigeria, (CBN) has issued a new guideline/directive on cryptocurrency transactions in the country and directed all banks to now disregard the ban it earlier placed on crypto transactions.
This directive was done through a circular dated December 22, 2023, and titled “Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS)”, with reference number FPR/DIR/PUB/CIR/002/003, and signed by Haruna Mustafa, CBN’s Director, Financial Policy and Regulation Department.
In February 2021, the apex bank issued a circular restricting banks and other financial institutions from operating accounts for cryptocurrency service providers in view of 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.
In the circular with reference number BSD/DIR/PUB/LAB/014/001, the apex bank reminded banks that dealing in crypto currencies or facilitating payments for cryptocurrency exchanges was prohibited.
At the time, it asked banks to identify persons or entities transacting in or operating crypto currency exchanges within their systems and ensure that their accounts were closed.
The New Circular
The apex bank acknowledged that current global trends have shown that there is a need to regulate the activities of virtual assets service providers (VASPs) which include cryptocurrencies and crypto assets.
For example, the Financial Action Task Force (FATF) in 2018 updated its Recommendation 15 to require VASPS to be regulated to prevent misuse of virtual assets for ML/TF/PF.
Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022 recognizes VASPs as part of the definition of a financial institution.
Furthermore, the Securities and Exchange Commission (SEC) 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.
In view of the aforementioned, the CBN issued the new guideline to provide guidance to financial institutions under its regulatory purview in respect of their banking relationship with VASPs in Nigeria.
The apex bank noted that this new guideline supersedes its previous 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.
All banks and other financial institutions are required to immediately comply with its new guideline.
However, banks and other financial institutions are still prohibited from holding, trading and/or transacting in virtual currencies on their own account.