CBN Lifts Ban On Cryptocurrency Transactions In Banks

Nearly three years after the Central Bank of Nigeria(CBN) restricted banks from operating accounts for cryptocurrency service providers and users, it has lifted the ban whilst still restricting financial institutions from directly transacting virtual assets.

In a circular issued by the CBN Director, Financial Policy and Regulation department, Haruna Mustafa, the apex bank said it has issued a guideline to provide guidance to financial institutions under its regulatory purview in respect of their banking relationship with Virtual Assets Service Providers (VASPs) in Nigeria.

The CBN in February 2021 issued a circular restricting banks and other financial institutions from operating accounts for cryptocurrency service providers in view of the money laundering and terrorism financing (ML/TF) risks and vulnerabilities inherent in their operations as well as the absence of regulations and consumer protection measures.

However, in the circular issued to All banks and other financial institutions, the CBM said “current trends globally have shown that there is need to regulate the activities 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 recognises 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.”

Recall that in 2021, the CBN had slammed a fine of N814.26 million on five commercial banks N814.26 million for contravening its directive to freeze bank accounts used for cryptocurrency transactions.