In a surprising turn of events, the Central Bank of Nigeria (CBN) has officially lifted the ban on cryptocurrency transactions in the country. This significant shift in policy was announced through a circular dated December 22, 2023, with reference number FPR/DIR/PUB/CIR/002/003, signed by the Director of the Financial Policy and Regulation Department, Haruna Mustafa.
By Lot Sunday
The circular, titled ‘Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS),’ instructs banks to disregard the previous ban on crypto transactions. The apex bank justified its decision by pointing to the global need for cryptocurrency regulation and acknowledging the evolving trends in the financial landscape.
Previously, in February 2021, the CBN had issued a circular restricting banks and other financial institutions from engaging with cryptocurrency service providers, citing concerns related to money laundering and terrorism financing risks. The absence of regulations and consumer protection measures further prompted the initial ban.
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However, the latest circular highlights a paradigm shift in the CBN’s stance, emphasizing the necessity for regulations surrounding virtual assets service providers (VASPs). The Financial Action Task Force (FATF) was mentioned in the circular which, in 2018, updated its Recommendation 15 to advocate for the regulation of VASPs to prevent the misuse of virtual assets for money laundering, terrorism financing, and proliferation financing.
The circular also references Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022, recognizing VASPs as part of the definition of a financial institution. Additionally, it cites rules issued by the Securities and Exchange Commission in May 2022, providing a regulatory framework for the operations of VASPs in Nigeria.
The CBN’s new guideline supersedes its previous ones from January 12, 2017, and February 5, 2021. It clarifies that while banks and financial institutions are now allowed to engage with VASPs, they are still prohibited from holding, trading, and/or transacting in virtual currencies on their own account.
All banks and financial institutions are urged to promptly comply with the new guideline, as stated in the circular with reference number BSD/DIR/PUB/LAB/014/001, dated February 5, 2021. In this earlier communication, the CBN had explicitly reminded banks of the prohibition on dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges, requiring them to identify and close accounts associated with such transactions.
