December 24, (THEWILL) – The Central Bank of Nigeria (CBN) has lifted ban on cryptocurrency transactions in the country, directing commercial banks and other financial institutions to jettison its previous instruction on crypto transactions.
The guidelines are contained in a communication dated December 22, 2023, signed by Haruna Mustapha, CBN’s director of financial policy and regulation department. titled ‘Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS).’
According to the CBN, VASPs means any entity that conducts exchange between virtual assets (cryptocurrencies) and fiat currencies, and transfers of virtual assets.
The development signals a shift from CBN’s initial position which restricts crypto transactions.
THEWILL recalls that in February 2021, CBN issued a circular to deposit money banks (DMBs), non-bank financial institutions (NBFIs), and OFIs to close accounts of persons or entities involved in cryptocurrency transactions within their systems.
The regulator further warned local financial institutions against dealing in crypto assets or facilitating payments for crypto exchanges.
The apex bank then cited concerns over money laundering (ML), terrorism financing (TF), cybercrime, and the volatility of cryptocurrencies as reasons for the ban
In its latest circular, however, the CBN directed all banks and OFIs to carry out cryptocurrency services.
The regulator said commercial banks must fully comply with the provisions of the guidelines on VASP.
“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,” the CBN said.
“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/proliferation of weapons of mass destruction (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 guide 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/GEN/CIR/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 account.”
On May 28, 2023, President Muhammadu Buhari signed the finance bill into law
The law introduced a 10 percent tax on gains on the disposal of digital assets including cryptocurrency.
