CBN asks banks to lift cryptocurrency transaction restrictions.

With regard to bitcoin assets in the country, the Nigerian Central Bank has changed its stance and asked banks to disregard its earlier restriction on cryptocurrency transactions.

The apex bank’s Financial Policy and Regulation Department Director, Haruna Mustafa, signed a circular on December 22, 2023, with reference number FPR/DIR/PUB/CIR/002/003, which outlines the guidelines for this.

The document’s title is “Guidelines on Bank Account Operations for Virtual Assets Service Providers (VASPS) to All Banks and Other Financial Institutions.”

Global events have shown that cryptocurrency regulation is essential, according to the central bank.

The press release continued, “The CBN, in February 2021, issued a circular restricting banks and other financial institutions from operating accounts for cryptocurrency service providers due to the risks and vulnerabilities associated with money laundering and terrorism financing (ML/TF) as well as the lack of regulations and consumer protection measures inherent in their operations.”

However, global trends have shown that virtual asset service providers (VASPs), which sell cryptocurrencies and other digital assets, need to have their operations regulated. By requiring the regulation of VASPS to prevent the improper use of virtual assets for ML/TF/PF, the Financial Action Task Force (FATF) updated Recommendation 15 in 2018 in response to this innovation.

Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022 acknowledges VASPs as a component of the definition of a financial institution.

In addition, the Securities and Exchange Commission released Rules on Issuance, Offering, and Custody of Digital Assets and VASPs in May 2022 to create a legal framework for their operations in Nigeria.

Because of the aforementioned, the CBN is providing this advice to financial institutions that are subject to its regulatory purview in order to assist them in managing their banking ties with VASPs in Nigeria.

FPR/DIR/GEN/CIR/06/010 of January 12, 2017, and BSD/DIR/PUB/LAB/014/001 of February 5, 2021, the aforementioned guidelines, according to the highest banking authority, are no longer in force.

Furthermore, it reaffirmed that virtual currency transactions, sales, and/or holdings on bank and other financial institution accounts are still prohibited.

Furthermore, it stipulated that the new principles must be immediately followed by all banks and other financial institutions.

Under reference number BSD/DIR/PUB/LAB/014/001, the central bank issued a circular on February 5, 2021, alerting banks to the fact that dealing in cryptocurrencies or processing payments for cryptocurrency exchanges is illegal.

In order to ensure that accounts associated with cryptocurrency exchanges were closed, banks were obliged at the time to identify persons or companies via their systems.