The Central Bank of Nigeria (CBN), which had prohibited banks from operating accounts for crypto-currency service providers and users for almost three years, has now lifted the prohibition while keeping restrictions on financial institutions’ ability to transact virtual assets directly in place.
The CBN said it has released a guideline to give guidance to financial institutions under its regulatory purview regarding their banking relationship with Virtual Assets Service Providers (VASPs) in Nigeria in a circular issued by Haruna Mustafa, Director, Financial Policy and Regulation department.
Remember that the CBN issued a circular in February 2021 that forbade banks and other financial institutions from managing accounts for cryptocurrency service providers due to the risks and vulnerabilities associated with money laundering and terrorism financing (ML/TF) that arise from their operations, as well as the lack of laws and consumer protection safeguards.
But the CBN stated in its most recent circular, which was distributed to all banks and other financial institutions on Friday: “current trends globally have shown that there is need to regulate the activites 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 tts Recommendation 15 to require VASPs to be regulated to prevent misuse of virtual assets for MLU/TF/PF. Furthermore, Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022 recognizes VASPs as part of the definition of a financial institution.
‘In addition, the Securities and Exchange Commission (SEC) 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 Guidelines to provide guidance to financial institutions under its regulatory purview in respect of their banking relationship with VASPs in Nigeria.
“The Guidelines supersedes the CBN’s circulars referenced FPR/DIR/GENICIR/06/010 of January 12, 2017 and BSD/DIR/PUB/LAB/014/001 of February 5, 2021 on the subject. However, banks and other financial institutions are still prohibited from holding, trading and/or transacting in virtual currencies on their own account.
“Accordingly, all banks and other financial institutions are hereby required to immediately comply with the provisions of the Guidelines.”
Gistlover points that in 2021, the CBN fined five commercial banks N814.26 million for defying its order to freeze bank accounts linked to cryptocurrency transactions.
