Central Bank of Nigeria Implements Stringent Guidelines for Virtual Asset Service Providers
In a significant policy shift, the Central Bank of Nigeria (CBN) has revealed that cash withdrawals from accounts associated with virtual and digital assets transactions will no longer be permitted. According to the CBN’s newly released ‘Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers,’ withdrawals from these accounts can only be executed through transfers or manager’s cheques.
The guidelines specify that accounts opened under this framework are exclusively for transactions related to virtual/digital assets and must not serve any other purpose. The directive explicitly states, “No cash withdrawal shall be allowed from the account. No third-party cheque shall be cleared from the account. Except for settlement of a virtual/digital assets transaction, the withdrawal shall be only through a managers’ cheque or transfer to an account.”
CBN’s Shift Towards Regulation of Crypto Assets
This move comes in the wake of a December circular issued by the CBN, titled ‘Circular to all banks and other Financial Institutions guidelines on operations of bank accounts for Virtual Assets Service Providers.’ The circular marked a policy change on crypto assets, directing banks to facilitate crypto transactions instead of restricting them.
The CBN’s updated stance reflects a more open approach to regulating crypto assets, as opposed to the previous rigid stance of excluding them from the formal banking sector. The new guidelines are designed to serve as a framework for the reintegration of cryptocurrencies into the formal banking sector.
Comprehensive Guidelines for Virtual Asset Service Providers
The guidelines apply to banks and financial institutions under the regulatory purview of the CBN and aim to establish minimum standards and requirements for banking relationships and account opening for Virtual Assets Service Providers in Nigeria. Financial institutions are now permitted to undertake various activities, including opening designated accounts, providing settlement services, acting as channels for foreign exchange flows and trade, and other activities as permitted by the CBN.
The CBN emphasizes that financial institutions must adhere strictly to these guidelines, with any deviation risking the suspension of their license. The guidelines outline a list of requirements to protect the financial system and customers from uncertainty and fraud risks.
Enforcement Measures for Non-Compliance
In addition to providing remedial measures, the CBN reserves the right to take sanctions against financial institutions, their boards, officers, or staff for failure to comply with the guidelines. The possible sanctions include the prohibition from opening further designated accounts, monetary penalties not below ₦2,000,000 against the institution, its board, senior management, and staff for any infraction, and the suspension of the operating license of a financial institution.
This regulatory framework signals the CBN’s commitment to overseeing and regulating virtual asset transactions, striking a balance between consumer protection, investor safety, and the burgeoning digital asset market in Nigeria.