CBN Lifts Embargo on Cryptocurrency Transactions

By Modupe Gbadeyanka

The embargo earlier placed on cryptocurrency transactions in the country by the Central Bank of Nigeria (CBN) has now been lifted by the banking industry regulator.

Recall that in February 2021, in a circular issued with the reference number BSD/DIR/PUB/LAB/014/001, the CBN prohibited commercial banks in the country from allowing digital currency transactions, forcing Nigerians to adopt peer-to-peer (P2P) trading of the digital coins.

In a notice to banks dated Friday, December 22, 2023, the central bank said deposit money banks (DMBs) can now allow their customers to trade in the highly volatile assets.

In the circular with reference number FPR/DIR/PUB/CIR/002/003 and signed by the Director of Financial Policy and Regulation Department of the CBN, Mr Haruna Mustafa, banks were directed to disregard the earlier ban on crypto transactions in the country.

However, the apex bank emphasised that banks and other financial institutions are still prohibited from holding, trading and/or transacting in virtual currencies on their account.

“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 recognises VASPs as part of the definition of a financial institution.

“In addition, the Securities and Exchange Commission 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 guideline to provide guidance to financial institutions under its regulatory purview in respect of their banking relationship with VASPs in Nigeria,” the disclosure said.