Nigeria’s Apex Bank Relaxes Ban On Cryptocurrency In Nigeria

Cryptocurrency in Nigeria witnesses a significant shift as the Central Bank of Nigeria (CBN) revises its stance on crypto assets within the country. The apex bank instructs financial institutions to disregard its previous prohibition on crypto transactions in a circular dated December 22, 2023, marked with reference number PR/DIR/PUB/CIR/002/003. This pivotal development is underscored by the Director of the CBN’s Financial Policy and Regulation Department, Haruna Mustafa.

Titled ‘Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS),’ the circular underscores the evolving global landscape, emphasising the necessity for regulatory frameworks governing cryptocurrency.

Quoting the CBN, the circular states, “The CBN, in February 2021, issued a circular restricting banks and other financial institutions from operating accounts for cryptocurrency service providers in view of the money laundering and terrorism financing (ML/TF) risks and vulnerabilities inherent in their operations as well as the absence of regulations and consumer protection measures.”

Recognising the dynamic nature of the sector, the apex bank acknowledges the need to regulate virtual asset service providers (VASPs), which encompass cryptocurrencies and crypto assets. The circular points to international developments, citing the Financial Action Task Force’s (FATF) 2018 update to Recommendation 15, emphasizing the regulation of VASPs to prevent the misuse of virtual assets for illicit activities.

Furthermore, the circular highlights Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022, which includes VASPs in the definition of financial institutions. It references the Securities and Exchange Commission’s May 2022 issuance of rules on the issuance, offering, and custody of digital assets and VASPs, establishing a regulatory framework for their operations in Nigeria.

The CBN asserts that its new guidelines supersede previous ones, specifically mentioning FPR/DIR/GEN/CIR/06/010 of January 12, 2017, and BSD/DIR/PUB/LAB/014/001 of February 5, 2021. Notably, the apex bank maintains the prohibition for banks and financial institutions from holding, trading, or transacting in virtual currencies on their own accounts.

The circular, with reference number BSD/DIR/PUB/LAB/014/001 dated February 5, 2021, serves as a reminder of the prior restrictions imposed by the CBN on dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges. During that period, banks were instructed to identify and close accounts associated with persons or entities involved in crypto transactions within their systems.

As per the latest directive, all banks and financial institutions are urged to promptly adhere to the new guidelines set forth by the CBN, marking a noteworthy shift in the regulatory landscape surrounding cryptocurrency in Nigeria.