The Central Bank of Nigeria (CBN) has officially lifted the ban on cryptocurrency assets in the country, reversing its earlier stance on the matter. The Director of the Financial Policy and Regulation Department at the apex bank, Haruna Mustafa, conveyed this information through a circular dated Friday, December 22, 2023.
The circular, titled ‘Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS),’ emphasizes the global need for cryptocurrency regulation and outlines new guidelines for the operations of virtual assets service providers.
The CBN’s new guideline supersedes previous directives issued on January 12, 2017, and February 5, 2021. It clarifies that banks and financial institutions are no longer prohibited from engaging in cryptocurrency transactions. However, the CBN affirms that banks and financial institutions remain barred from holding, trading, and transacting in virtual currencies on their own account.
The circular states, “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 CBN refers to the Financial Action Task Force’s (FATF) Recommendation 15, updated in 2018, requiring the regulation of VASPs to prevent the misuse of virtual assets for money laundering, terrorism financing, and proliferation financing. The circular also cites Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022, recognizing VASPs as part of the definition of a financial institution.
Furthermore, the Securities and Exchange Commission in May 2022 issued rules on the issuance, offering, and custody of digital assets and VASPs, providing a regulatory framework for their operations in Nigeria.
The CBN’s decision aligns with a broader global trend towards acknowledging and regulating the cryptocurrency space. It emphasizes the need for financial institutions to comply immediately with the new guidelines.
This development marks a notable shift from the CBN’s previous circular dated February 5, 2021, which reminded banks of the prohibition on dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges. The apex bank had instructed banks to identify and close accounts associated with persons or entities involved in cryptocurrency transactions.
As Nigeria adapts to the evolving landscape of digital assets, the CBN’s latest move reflects a recognition of the importance of regulating and integrating cryptocurrencies within the country’s financial framework.
