The Central Bank of Nigeria (CBN) has officially rescinded its ban on cryptocurrency transactions, as revealed in a December 22, 2023 circular. Haruna Mustafa, Director of the Financial Policy and Regulation Department, made the announcement, further underscoring Nigeria’s commitment to adapting to the dynamic global financial landscape.
The CBN’s decision comes in response to evolving global trends emphasizing the need to regulate virtual assets service providers (VASPs), including cryptocurrencies and crypto assets. 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 imperative of managing associated risks such as money laundering and terrorism financing. This move aligns with recommendations from the Financial Action Task Force (FATF) and marks a departure from the CBN’s previous directives in 2017 and 2021.
New guidelines for banking activities with VASPs
In light of the policy reversal, the CBN has issued fresh guidelines aimed at regulating banking activities related to VASPs, outlining the operation of bank accounts for these entities. Significantly, Section 30 of the Money Laundering Act of 2022 now officially recognizes VASPs as part of the definition of a financial institution. The guidelines emphasize the immediate necessity for compliance from all banks and financial institutions in Nigeria.
Continued prohibition on direct crypto transactions
While lifting the ban opens doors for banking transactions with VASPs, the CBN maintains a clear stance on banks and financial institutions engaging in holding, trading, or transacting virtual currencies on their own accounts. These activities remain strictly prohibited. This nuanced approach demonstrates Nigeria’s receptiveness to the digital currency wave while exercising prudence in mitigating potential risks.
This significant policy shift by the CBN marks a transformative chapter in Nigeria’s financial history. It reflects the country’s willingness to embrace evolving global financial trends while maintaining a vigilant approach to managing potential risks associated with the crypto space.