In a significant policy shift, the Federal Government of Nigeria has announced the lifting of the ban on cryptocurrency transactions, allowing Virtual Assets Service Providers (VASPs) to operate within a carefully regulated framework. The decision comes as a response to evolving global trends and a recognition of the growing importance of digital currencies in the financial landscape.
The Central Bank of Nigeria (CBN), in a circular dated December 22, 2023, outlined comprehensive guidelines for the operations of bank accounts for Virtual Assets Service Providers. The guidelines aim to mitigate money laundering, terrorism financing, and other associated risks while providing a regulatory framework for the burgeoning crypto industry.
- Designated Accounts: VASPs must adhere to stringent regulations, including the use of designated accounts exclusively for transactions involving virtual/digital assets. This measure is designed to enhance transparency and accountability in crypto-related activities.
- AML, CFT, and CPF Compliance: Eligible stakeholders, including commercial and merchant banks, payment service providers, and entities registered by the Securities and Exchange Commission (SEC), are mandated to strictly comply with Anti-Money Laundering (AML), Combating the Financing of Terrorism (CFT), and Countering Proliferation Financing (CPF) policies.
- Monthly Reporting: To ensure continuous monitoring, financial institutions must submit detailed monthly reports to the CBN. These reports include information on the number of designated accounts opened, transaction values, counterparty details, incidents of fraud or theft, and customer complaints.
- Operational and Transactional Limits: Financial institutions are tasked with establishing prudent transaction limits for each designated account based on risk assessments. These limits are expected to correlate with the volume of cash moved by the account holder and the associated business risks.
- Restrictions on Account Use: Designated accounts shall be solely used for virtual/digital asset transactions, and no cash withdrawals or third-party cheques will be permitted. Withdrawals will be limited to Managers’ Cheques or transfers to other designated accounts.
The lifting of the ban reflects the government’s acknowledgement of the transformative potential of cryptocurrencies and its commitment to fostering innovation while safeguarding against illicit activities. The move aligns with global best practices, as recognised by the Financial Action Task Force (FATF) recommendations.
As Nigeria embraces the era of digital finance, the lifting of the ban on crypto transactions signifies a pivotal moment for the nation’s financial sector. The carefully crafted guidelines aim to strike a balance between encouraging innovation and ensuring a secure financial environment. Market participants and stakeholders are encouraged to familiarize themselves with the new regulations to responsibly navigate the evolving landscape of cryptocurrency transactions.
Disclaimer: The information in this article is based on the CBN circular dated December 22, 2023, and is subject to change as per regulatory updates.
