BREAKING: Central Bank of Nigeria (CBN) reverses ban on cryptocurrency transactions
The Central Bank of Nigeria (CBN) has officially lifted its ban on cryptocurrency transactions, according to a circular dated December 22, 2023. The announcement was made by Haruna Mustafa, Director of the Financial Policy and Regulation Department, highlighting Nigeria’s commitment to adapting to the dynamic global financial landscape.
The decision to lift the ban comes in response to global trends that emphasize the need to regulate virtual assets service providers (VASPs), which include cryptocurrencies and crypto assets. The circular, titled ‘Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPs),’ recognizes the importance of managing associated risks such as money laundering and terrorism financing. This move aligns with the recommendations of the Financial Action Task Force (FATF) and marks a departure from the CBN’s previous directives in 2017 and 2021.
The CBN has issued new guidelines to regulate banking activities related to VASPs in light of the policy reversal. These guidelines outline the operation of bank accounts for VASPs and emphasize the immediate need for compliance from all banks and financial institutions in Nigeria. Notably, the Money Laundering Act of 2022 now officially recognizes VASPs as part of the definition of a financial institution.
However, while the ban has been lifted, the CBN maintains a clear stance on banks and financial institutions engaging in direct holding, trading, or transacting of virtual currencies on their own accounts. These activities remain strictly prohibited. This nuanced approach showcases Nigeria’s willingness to embrace the digital currency wave while exercising caution in mitigating potential risks.
This significant policy shift by the CBN ushers in a transformative chapter in Nigeria’s financial history. It reflects the country’s openness to evolving global financial trends while maintaining a vigilant approach to managing potential risks associated with the crypto space.