CBN Lifts Ban on Cryptocurrency Transactions

The Central Bank of Nigeria (CBN), has lifted the  ban imposed on crypto transactions in the country, while still restricting financial institutions from directly transacting virtual assets.

This directive is contained in a circular dated December 22, 2023, with reference number FPR/DIR/PUB/CIR/002/003, signed by the CBN’s director of financial policy and Regulation Department, Haruna Mustafa.

In the circular titled ‘Circular to all Banks and other Financial Institutions Guidelines on Operations of Accounts for Virtual Assets Service Providers (VASPS)’, the CBN issued a guideline to provide guidance to financial institutions under its regulatory purview in respect of their banking relationship with Virtual Assets Service Providers (VASPs) in Nigeria.

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 recognizes 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. In view of the foregoing, the CBN hereby issues this Guidelines to provide guidance to financial institutions under its regulatory purview in respect of their banking relationship with VASPs in Nigeria. 

“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. Accordingly, all banks and other financial institutions are hereby required to immediately comply with the provisions of the Guidelines.”

Following CBN’s latest directive on crypto, banks are still prohibited from holding, trading, and transacting in virtual currencies on their account. Experts state that due to the volatility of crypto funds, implementing checks across the board makes perfect sense to safeguard customer funds.