CBN Lifts Ban on Transaction in Cryptocurrencies

The Central Bank of Nigeria, CBN has lifted ban placed on transaction in cryptocurrencies, explaining that banks and other financial institutions can provide services to cryptocurrency exchanges and dealers also know as Virtual Assets Providers, VAPs.

However the CBN excluded banks from holding or transacting in cryptocurrencies.The CBN said financial institutions now have the freedom to own VAPs account, provide designated settlement accounts and services, act as channels for foreign flows and carry out all other legal financial activities permitted by CBN.

Although, the CBN pointed that bank accounts opened for VAPs won’t be used for cash withdrawal and third party cheque.Director, Financial Policy and Regulation, CBN, Haruna Mustafa announced the new directive in a circular to banks and other financial institutions, titled, Guidelines on Operations of Bank Account for Virtual Assets Providers, VAPs).

The Circular stated:”The CBN in February 2021 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.

“However, current trends globally have shown that there is 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 recognizes VASPs as part of the definition of a financial institution. In addition, 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 foregoing, the CBN hereby issues this Guidelines to provide guidance to financial institutions under its regulatory purview in respect of their banking relationship with VASPs in Nigeria.

“The Guidelines supersedes the CBN’s circulars 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. However, banks and other financial institutions are stili prohibited from holding, trading and/or transacting in virtual currencies on their own account.”