The Central Bank of Nigeria (CBN) has lifted its ban on cryptocurrency transactions in the country. CBN had in 2021, directed banks to cease carrying out all transactions related to the digital currency, citing concerns of money laundering and terrorism financing.
The new directive was contained in a circular titled “Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS)” with reference number FPR/DIR/PUB/CIR/002/003.
CBN’s Director, Financial Policy and Regulation Department Haruna Mustafa signed the document, dated December 22, 2023.
The circular reads:
“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, current trends globally have shown that there is a 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 its Recommendation 15 to require VASPS to be regulated to prevent misuse of virtual assets for ML/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 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 guideline to provide guidance to financial institutions under its regulatory purview in respect of their banking relationship with VASPs in Nigeria. “
According to the Central Bank, the new directive replaces previous ones from 2017 and 2021.
Meanwhile, banks and other financial institutions are still prohibited from holding, trading, and/or transacting in virtual currencies on their own account.
Furthermore, banks and other financial institutions are instructed to promptly implement the new guideline.
A cryptocurrency is an encrypted data string that represents a unit of currency. It is a form of digital currency that enables individuals to engage in direct transactions through an online system, providing an alternative means of exchange.
The CBN’s position on cryptocurrency has been longstanding, with a series of directives dating back to January 12, 2017 and February 5, 2021, where banks and financial institutions were instructed to cease transactions related to digital currencies such as Bitcoin and Litecoin.
The CBN has justified its non-acceptance of cryptocurrencies by stating that digital currencies are not considered legal tender.
Despite these regulatory measures, Nigeria remains one of the major users of cryptocurrency globally, and the largest in Africa.