The Central Bank of Nigeria (CBN) has lifted the ban on cryptocurrency transactions, reversing its earlier restriction on crypto assets and instructing banks to disregard the initial ban. Haruna Mustafa, the Director of the Financial Policy and Regulation Department at CBN, announced this change in a circular, citing the global need for crypto regulation as a determining factor.
Mustafa explained, “The CBN, in February 2021, issued a circular restricting banks and other financial institutions from operating accounts for cryptocurrency service providers, citing 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.”
He highlighted the evolving global landscape, noting the necessity of regulating virtual assets service providers (VASPs), which include cryptocurrencies and crypto assets. Mustafa referred to the Financial Action Task Force (FATF) updating its recommendations in 2018 to require the regulation of VASPs to prevent the misuse of virtual assets for ML/TF/PF. Additionally, he mentioned that Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022 recognizes VASPs as part of the definition of a financial institution.
The circular emphasized the Securities and Exchange Commission’s issuance of rules in May 2022 on the issuance, offering, and custody of digital assets and VASPs to provide a regulatory framework for their operations in Nigeria.
In light of these developments, the CBN issued new guidelines to provide clarity to financial institutions under its regulatory purview regarding their banking relationships with VASPs in Nigeria. The directive supersedes previous guidelines that imposed restrictions on cryptocurrency transactions.
However, Mustafa clarified that banks and other financial institutions are still prohibited from holding, trading, and/or transacting in virtual currencies on their own account. He urged immediate compliance with the new guidelines, emphasizing the need for financial institutions to adhere to the updated regulatory framework.