CBN Lifts Ban on Cryptocurrency Transactions, Unveils New Guidelines for Financial Institutions
In a significant development, the Central Bank of Nigeria (CBN) has officially lifted the ban on cryptocurrency transactions within the country. The apex bank issued a comprehensive circular, dated December 22, 2023, titled ‘Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS)’ (Reference: FPR/DIR/PUB/CIR/002/003).
The circular, signed by Haruna Mustafa, Director of the Financial Policy and Regulation Department at CBN, outlines guidelines for financial institutions regarding their banking relationship with Virtual Assets Service Providers (VASPs) in Nigeria.
Despite this positive move, the CBN clarified that banks and financial institutions are still prohibited from holding, trading, and/or transacting in virtual currencies on their accounts. This decision aligns with the apex bank’s previous directive issued in February 2021, instructing banks to close accounts associated with cryptocurrency transactions. The initial directive aimed to mitigate risks related to money laundering, terrorism financing (ML/TF), and operational vulnerabilities in the absence of proper regulations.
Former CBN Governor Godwin Emefiele, at the time, expressed concerns about the challenges of effectively tracking cryptocurrency trading, making regulatory functions challenging for the apex bank.
The recent directive from CBN acknowledges the evolving global landscape, emphasizing the necessity for crypto regulation. It mandates all banks and financial institutions to swiftly comply with the new guidelines.
Cbn lifts ban on cryptocurrency: Unveils New Guidelines
The statement from CBN reads, “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.”
The Financial Action Task Force (FATF) updated its Recommendation 15 in 2018 to regulate VASPs and prevent misuse of virtual assets for ML/TF/PF. Additionally, Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022, recognizes VASPs as part of the definition of a financial institution. The Securities and Exchange Commission also played a role by issuing Rules on Issuance, Offering, and Custody of Digital Assets and VASPs in May 2022, providing a regulatory framework for their operations in Nigeria.
Cbn lifts ban on cryptocurrency: What it means?
This move by the CBN reflects a proactive response to the changing dynamics of the global financial landscape, aligning Nigeria with international best practices in the regulation of cryptocurrency and virtual assets. It signals a crucial step towards fostering a more inclusive and regulated financial environment in the country. The impact of this decision is expected to reverberate across the financial sector, paving the way for innovation and responsible use of virtual assets.
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