The Central Bank of Nigeria (CBN) has announced the relaxation of restrictions on cryptocurrency transactions in the country. This decision, revealed in a circular dated December 22, 2023, and signed by Haruna Mustafa, the Director of the Financial Policy and Regulation Department, comes as a response to global trends and the growing need for cryptocurrency regulation.
The circular, titled ‘Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS),’ was specifically addressed to banks. The CBN highlighted that the evolving global landscape necessitates a regulatory framework for virtual assets service providers (VASPs) involved in cryptocurrency and crypto asset activities.
In February 2021, the CBN had issued a circular restricting banks and financial institutions from operating accounts for cryptocurrency service providers, citing concerns related to money laundering, terrorism financing, and the lack of regulations and consumer protection measures.
The latest circular acknowledges the changing dynamics, with global trends emphasizing the importance of regulating VASPs. It points out that the Financial Action Task Force (FATF) updated its Recommendation 15 in 2018, requiring the regulation of VASPs to prevent misuse of virtual assets for illicit activities. Additionally, the Money Laundering (Prevention and Prohibition) Act, 2022, recognizes VASPs as part of the definition of a financial institution.
The Securities and Exchange Commission in Nigeria also issued rules in May 2022 to provide a regulatory framework for the issuance, offering, and custody of digital assets and VASPs.
The new guidelines from the CBN supersede its previous circulars on the subject, emphasizing a shift in the regulatory approach toward cryptocurrency transactions in Nigeria. This development signals a recognition of the importance of accommodating and regulating the evolving landscape of virtual assets and cryptocurrencies in the country.