In a surprising turn of events, the Central Bank of Nigeria (CBN) has reversed its decision to ban cryptocurrency, signaling a significant shift in its stance on virtual assets.
Haruna Mustapha, the Director of Financial Policy and Regulation at CBN, announced this groundbreaking development in a circular issued on Friday.
The apex bank acknowledged the evolving global landscape of cryptocurrencies and has chosen to provide clear guidelines and regulations for banks to manage these digital assets.
The move aims to align Nigeria’s approach with international trends while preventing potential misuse of cryptocurrencies. The CBN is urging all banks to diligently adhere to the newly issued guidelines and regulations.
The full statement, marked FPR/DIR/PUB/CIR/002/003, outlines the new guidelines for the operations of bank accounts catering to Virtual Assets Service Providers (VASPs).
This comes after the CBN initially imposed restrictions on banks and financial institutions regarding cryptocurrency services in February 2021, citing concerns about money laundering and terrorism financing risks.
Recent global developments have highlighted the necessity of regulating virtual assets service providers, including cryptocurrencies and crypto assets. The Financial Action Task Force (FATF) updated its Recommendation 15 in 2018, emphasizing the need for VASPs to be regulated to prevent the misuse of virtual assets for money laundering, terrorism financing, and proliferation financing.
The Money Laundering (Prevention and Prohibition) Act of 2022, in Section 30, officially recognizes VASPs as part of the definition of a financial institution. Additionally, the Securities and Exchange Commission (SEC) in May 2022 introduced rules to govern the issuance, offering, and custody of digital assets and VASPs, establishing a regulatory framework for their operations in Nigeria.
In light of these developments, the CBN has issued comprehensive guidelines to provide direction to financial institutions under its regulatory purview concerning their banking relationships with VASPs in Nigeria. Notably, these guidelines supersede previous circulars (FPR/DIR/GEN/CIR/06/010 of January 12, 2017, and BSD/DIR/PUB/LAB/014/001 of February 5, 2021) on the subject. However, it’s essential to note that banks and financial institutions are still prohibited from holding, trading, and transacting in virtual currencies on their own accounts.
With the issuance of these guidelines, all banks and financial institutions are obligated to promptly comply with the provisions outlined by the CBN. This marks a significant shift in Nigeria’s regulatory approach to cryptocurrencies and opens new doors for the industry within the country.
