On December 22, 2023, the Central Bank of Nigeria (CBN) officially revoked its ban on cryptocurrency transactions, according to a circular. Haruna Mustafa, Director of the Financial Policy and Regulation Department, announced this decision, highlighting Nigeria’s commitment to adapting to the evolving global financial landscape. The CBN’s move is a response to international trends, emphasizing the regulation of virtual assets service providers (VASPs), including cryptocurrencies. The circular, titled ‘Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPs),’ recognizes the importance of managing associated risks like money laundering and terrorism financing. This aligns with FATF recommendations and signifies a shift from the CBN’s previous directives in 2017 and 2021.
Fresh Directives for Banking Engagements with Virtual Assets Service Providers (VASPs)
Following the policy reversal, the CBN has issued new regulations to oversee banking activities associated with Virtual Assets Service Providers (VASPs), detailing the procedures for operating bank accounts for these entities. Notably, Section 30 of the Money Laundering Act of 2022 officially includes VASPs in the definition of a financial institution. The guidelines stress the immediate requirement for compliance from all banks and financial institutions in Nigeria.
Ongoing Restriction on Direct Cryptocurrency Transactions Remains in Effect
While the ban on cryptocurrency transactions has been lifted for banking activities with VASPs, the CBN maintains a firm position against banks and financial institutions directly holding, trading, or transacting virtual currencies on their own accounts. Such activities are still strictly prohibited. This nuanced approach showcases Nigeria’s openness to the digital currency wave, coupled with a cautious strategy to address potential risks.
The CBN’s substantial policy shift signifies a transformative milestone in Nigeria’s financial history, highlighting the country’s readiness to embrace dynamic global financial trends while vigilantly managing potential risks linked to the cryptocurrency space.
