Cryptocurrency Transactions no Longer Banned as CBN Lifts Restrictions

The Central Bank of Nigeria has revised its position on cryptocurrency assets within the country, instructing banks to ignore its previous prohibition on crypto transactions.

This update is outlined in a circular dated December 22, 2023 (reference: FPR/DIR/PUB/CIR/002/003), signed by Haruna Mustafa, the Director of the Financial Policy and Regulation Department at the central bank.

The document, named ‘Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS),’ emphasizes the global trend towards cryptocurrency regulation as the basis for this shift.

Yet, recent global trends underscore the necessity to oversee the operations of virtual assets service providers (VASPs), encompassing cryptocurrencies and crypto assets.

In response, the Financial Action Task Force (FATF) adapted its Recommendation 15 in 2018, mandating the regulation of VASPs to thwart the improper use of virtual assets for money laundering, terrorism financing, and proliferation financing.

Moreover, within the Money Laundering (Prevention and Prohibition) Act of 2022, Section 30 explicitly acknowledges virtual assets service providers (VASPs) as integral to the definition of a financial institution.

Additionally, the Securities and Exchange Commission took a step in May 2022 by issuing rules governing the issuance, offering, and custody of digital assets and virtual assets service providers (VASPs). This initiative aims to establish a regulatory framework for their operations in Nigeria.

Considering the above, the Central Bank of Nigeria (CBN) is now issuing this guideline to offer direction to financial institutions within its regulatory oversight regarding their banking associations with virtual assets service providers (VASPs) in Nigeria.

The CBN specifies that this new guideline takes precedence over its prior directives mentioned in FPR/DIR/GEN/CIR/06/010 dated January 12, 2017, and BSD/DIR/PUB/LAB/014/001 dated February 5, 2021, on the same subject.

Furthermore, the Central Bank emphasized the ongoing prohibition on banks and other financial institutions from holding, trading, or transacting in virtual currencies on their own accounts.

The directive mandates all banks and financial institutions to promptly adhere to the newly issued guidelines. In a circular dated February 5, 2021, with reference number BSD/DIR/PUB/LAB/014/001, the central bank reiterated its stance, reminding banks that engaging in cryptocurrencies or assisting with payments for cryptocurrency exchanges was prohibited.

During that period, banks were instructed to identify individuals or entities involved in transactions or operating cryptocurrency exchanges within their systems and take the necessary measures, including closing their accounts.

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