Cryptocurrency: Nigeria Reverses Ban, Introduces New Guidelines
In a significant policy shift, the Central Bank of Nigeria (CBN) has rescinded its previous ban on cryptocurrency transactions, as indicated in a circular dated December 22, 2023 (Ref: FPR/DIR/PUB/CIR/002/003).
The directive, signed by Haruna Mustafa, Director of the Financial Policy and Regulation Department, and seen by Excel Magazine International, emphasizes the evolving global need for crypto regulation.
The circular, titled ‘Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS),’ acknowledges the changing landscape and highlights the necessity of regulating virtual asset service providers, including cryptocurrencies.
The CBN’s initial circular in February 2021, which restricted financial institutions from engaging with cryptocurrency service providers due to money laundering and terrorism financing risks, has been reconsidered.
The recent guideline cites international developments, including the Financial Action Task Force’s updated Recommendation 15 in 2018, urging the regulation of VASPs to prevent misuse of virtual assets.
Moreover, Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022, recognizes VASPs as part of the financial institution definition.
The Securities and Exchange Commission also issued rules in May 2022 to establish a regulatory framework for digital assets and VASPs in Nigeria.
The CBN’s latest guideline supersedes previous directives (FPR/DIR/GEN/CIR/06/010 of January 12, 2017, and BSD/DIR/PUB/LAB/014/001 of February 5, 2021), clarifying that banks and financial institutions are still prohibited from holding, trading, or transacting in virtual currencies on their own accounts.
While affirming the prohibition, the CBN emphasizes immediate compliance with the new guideline.
The circular, referencing BSD/DIR/PUB/LAB/014/001 from February 5, 2021, serves as a reminder of the previous ban, urging banks to identify and close accounts associated with cryptocurrency transactions.
This development signifies a strategic regulatory pivot by the CBN, aligning with evolving global standards and recognizing the importance of creating a comprehensive framework for the operation of virtual assets in Nigeria.
