After nearly three years of prohibiting banks from opening accounts for cryptocurrency service providers and users, the Central Bank of Nigeria (CBN) has removed the prohibition while still prohibiting financial institutions from directly transacting in virtual assets.

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

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

However, the CBM stated in the circular issued to all banks and other financial institutions that “current global trends 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 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.

Given the circumstances, the CBN hereby provides these Guidelines to provide direction to financial institutions subject to its regulatory scope in Nigeria regarding their banking relationships with VASPs.

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.

As a result, all banks and other financial institutions are obligated to promptly comply with the Guidelines’ rules.”

Remember that the CBN fined five commercial banks N814.26 million in 2021 for violating its mandate to freeze bank accounts used for cryptocurrency transactions.