CBN Acknowledges Global Trends, Stresses the Need for Regulation in the Cryptocurrency Space
In a significant policy shift, the Central Bank of Nigeria (CBN) has reversed its stance on the ban on cryptocurrency transactions in the country. The apex bank, in a circular dated December 22, 2023, directed banks to disregard its previous ban on crypto transactions and issued new guidelines for the operation of bank accounts for Virtual Asset Service Providers (VASPs).
The circular, titled ‘Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS),’ bears reference number FPR/DIR/PUB/CIR/002/003 and is signed by Haruna Mustafa, the Director of the Financial Policy and Regulation Department.
The CBN highlighted the evolving global landscape and emphasized the necessity of regulating virtual assets and cryptocurrencies. The circular referred to the initial ban on crypto transactions in February 2021, citing concerns related to money laundering, terrorism financing, and the lack of regulatory frameworks and consumer protection measures.
However, the recent circular acknowledged the global shift towards regulating Virtual Asset Service Providers (VASPs) and cited developments such as the Financial Action Task Force’s (FATF) 2018 update to Recommendation 15, requiring VASPs to be regulated. Additionally, the circular mentioned Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022, recognizing VASPs as part of the definition of a financial institution.
The Securities and Exchange Commission’s issuance of Rules on Issuance, Offering, and Custody of Digital Assets and VASPs in May 2022 was also highlighted as part of the regulatory framework in Nigeria.
The CBN’s new guidelines supersede previous ones from January 12, 2017, and February 5, 2021, which prohibited banks from holding, trading, and transacting in virtual currencies on their own account.
Despite the revision, the CBN reiterated that banks and financial institutions remain prohibited from engaging in virtual currency activities on their own accounts. The circular emphasized immediate compliance with the new guidelines.
In its circular dated February 5, 2021, the CBN had previously prohibited banks from dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges, urging them to identify and close the accounts of entities involved in such transactions.
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