CBN Reverses Ban On Crypto-currency
BY EDMOND ODOK – Almost three years after restricting banks and other financial institutions from operating accounts for cryptocurrency service providers, the Central Bank of Nigeria (CBN) has now reversed itself on crypto assets in the country.
Consequently, the apex Bank has directed banks to disregard its earlier ban on crypto transactions, noting that current trends globally have shown the need for crypto regulations.
The policy reversal is contained in a circular signed by the CBN’s Director of Financial Policy and Regulation Department, Haruna Mustafa, dated December 22, 2023, with reference number FPR/DIR/PUB/CIR/002/003.
Titled “Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS)”, the circular said; “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.
“However, 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. Following this development, the Financial Action Task Force (FATF) in 2018 also updated its Recommendation 15 to require VASPS to be regulated to prevent misuse of virtual assets for ML/TF/PF.
“Furthermore, Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022 recognises VASPs as part of the definition of a financial institution.
“In addition, the Securities and Exchange Commission in May 2022 issued Rules on Issuance, Offering and Custody of Digital Assets and VASPs to provide a regulatory framework for their operations in Nigeria.
“In view of the foregoing, the CBN hereby issues this guideline to provide guidance to financial institutions under its regulatory purview in respect of their banking relationship with VASPs in Nigeria. “
However, while affirming that banks and other financial institutions are still prohibited from holding, trading and/or transacting in virtual currencies on their own account, the CBN further explained that this new guideline supersedes the old ones referenced FPR/DIR/GEN/CIR/06/010 of January 12, 2017, and BSD/DIR/PUB/LAB/014/001 of February 5, 2021 on the subject.
In the February 5, 2021 circular, the CBN had cautioned banks to be mindful of the ban and adhere strictly to the existing regulations on crypto currencies and facilitating payments for cryptocurrency exchanges.
Additionally, banks were ordered to identify persons or entities transacting in or operating crypto currency exchanges within their systems and ensure such accounts were closed immediately.
Meanwhile, the Bank’s circular has directed all Deposit Money Banks (DMBs) and other financial institutions in the country to ensure immediate compliance with the new guideline.
