CBN Reverses Course on Crypto in Nigeria: Regulatory Framework Emerges
By Patience Ikpeme
The Central Bank of Nigeria (CBN) has announced a change in its stance on cryptocurrency transactions.
In a circular issued Friday, December 22nd, 2023 with reference number FPR/DIR/PUB/CIR/002/003, and signed by the Director, Financial Policy and Regulation Department, Haruna Mustafa, the apex bank directed banks and other financial institutions to disregard its previous ban on crypto-related transactions.
This move marks a stark contrast to the CBN’s 2021 directive prohibiting banks from serving cryptocurrency Virtual Assets Service Providers (VASPS) due to concerns about money laundering and terrorism financing. However, citing evolving global trends and the need for regulation, the CBN has chosen a new path.
“Current trends globally have shown that there is a need to regulate VASPs, whose activities include dealing in virtual assets and cryptocurrencies,” states the circular.
This acknowledgement aligns with the updated recommendations of the Financial Action Task Force (FATF) and the recent categorization of VASPs as financial institutions under the Money Laundering (Prevention and Prohibition) Act of 2022.
Furthermore, the Securities and Exchange Commission’s 2022 regulations on digital assets and VASPs has pave the way for controlled operation within Nigeria. Therefore, the CBN is issuing new guidelines for its supervised financial institutions regarding their relationships with VASPs.
While banks and other financial institutions are still restricted from holding, trading, or transacting in virtual currencies themselves, they are now permitted to facilitate transactions for licensed VASPs operating within the newly established regulatory framework.
This signifies a crucial step towards integrating the burgeoning crypto sector into the mainstream Nigerian financial system.
“This guideline supersedes the CBN’s previous pronouncements on the subject,” declared the circular, confirming a definitive break from the earlier ban.
