The Central Bank of Nigeria (CBN) has reversed its previous ban on crypto transactions and given banks the go-ahead to process such transactions.
This change was communicated in a circular dated December 22, 2023, signed by Haruna Mustafa, the Director of the Financial Policy and Regulation Department at the CBN.
The circular, titled “Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPs),” reflects the central bank’s recognition of the global shift towards crypto regulation.
The CBN had previously issued a circular in February 2021, restricting banks and other financial institutions from operating accounts for cryptocurrency service providers due to concerns about money laundering and terrorism financing risks.
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The CBN, on the other hand, now recognises the necessity to control the operations of VASPs, which include cryptocurrencies and crypto assets. This change is consistent with the Financial Action Task Force’s (FATF) 2018 amendment to Recommendation 15, which requires VASPs to be regulated to avoid the abuse of virtual assets for money laundering and terrorist financing.
The CBN’s new position is further backed up by the Money Laundering (Prevention and Prohibition) Act of 2022, which includes VASPs in the definition of a financial institution.
“In addition, the Securities and Exchange Commission in May 2022 issued Rules on Issuance, Offering and Custody of Digital Assets and VASPs to prevent a regulatory framework for their operations in Nigeria,” the circular read in part.
“In view of the foregoing, the CBN hereby issues this guideline [which supersedes the old one BSD/DIR/OUB/LAB/014/001 of February 5, 2021] to provide guidance to financial institutions under its regulatory preview in respect of their banking relationship with VASPs in Nigeria.”
Despite this change, the CBN maintains that banks and other financial institutions are still barred from owning, dealing, and/or transacting in virtual currencies on their own behalf.
This restriction aims to ensure that these institutions maintain their primary role as facilitators of transactions rather than participants in the crypto market.
