The Central Bank of Nigeria has released guidelines for banks to set up cryptocurrency accounts, marking a significant development following the removal of the ban on financial institutions serving digital asset companies.
The regulations governing virtual asset service providers (VASPs) impose strict constraints on the utilization of these accounts.
In February 2021, the CBN had prohibited banks and other financial institutions from participating in transactions involving cryptocurrency assets. Recently, on December 23, 2023, the Nigerian central bank lifted the ban on crypto trading services.
Targeted Regulatory Framework
The Central Bank of Nigeria (CBN) initially adopted a cautious stance on cryptocurrencies, prohibiting banks from facilitating digital asset transactions in 2017. However, on December 22, the CBN reversed its position, permitting banks to open accounts with cryptocurrency exchanges and other digital asset service providers. The new regulations outline the following key provisions:
1. Naira-Based Accounts Only: Banks must maintain separate naira-denominated accounts for digital asset service providers, exclusively for this purpose and without links to personal or business accounts.
2. No Cash Withdrawals: Strictly prohibiting cash withdrawals from cryptocurrency accounts, all transactions must be conducted through electronic transfers or other non-cash methods.
3. Prohibition of Third-Party Checks: Banks are not allowed to clear third-party checks through crypto accounts to prevent money laundering and illicit activities.
4. Withdrawal Limits: Banks are restricted to allowing two withdrawals per quarter from crypto accounts, aiming to prevent excessive withdrawals and ensure the legitimate use of these accounts for business purposes.
