CBN Lifts Two-Year Ban on Cryptocurrency Transactions, Introduces Stringent Regulations for Virtual Assets Services in Nigeria

The Central Bank of Nigeria (CBN) has lifted the two-year ban on cryptocurrency transactions, allowing financial institutions to engage in virtual assets services with stringent customer KYC and anti-money laundering checks. The directive, issued by Haruna Mustafa, the Director of the Financial Policy and Regulation department at CBN, outlines guidelines for banking relationships with Virtual Assets Service Providers (VASPs) in Nigeria.

This development follows the CBN’s circular in February 2021 that restricted banks from operating accounts for cryptocurrency service providers due to concerns related to money laundering and terrorism financing. The absence of regulations and consumer protection measures also influenced the initial decision.

However, the latest circular emphasizes the global need to regulate virtual asset service providers, citing trends and recommendations from the Financial Action Task Force (FATF). The FATF’s 2018 Recommendation 15 mandated VASP regulation, aiming to curb the misuse of virtual assets for illicit activities. Moreover, Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022, acknowledges VASPs within the financial institution category.

The Securities and Exchange Commission (SEC) had previously issued rules in May 2022 to provide a regulatory framework for the operations of Digital Assets and VASPs in Nigeria, contributing to the comprehensive approach to regulating the crypto space.

The decision to regulate virtual asset services aligns with global trends, yet skepticism persists among certain crypto experts. Harri Obi (@Harri_obi) tweeted,

“LMAO. The Nigerian crypto ban hasn’t been lifted. They haven’t said anything new from what SEC has been saying for 2 years now. They’re only playing catch up. I’m still not sure why everyone is running victory laps.”

Harri Obi

Some other critics also offer their insights on the matter:

The CBN circular “GUIDELINES ON OPERATIONS OF BANK ACCOUNTS FOR VIRTUAL ASSETS SERVICE PROVIDERS (VASPs)” that was released today is exciting but requires caution to proceed

After going through the 12-pager, I have put together 5 things that concerned stakeholders should… pic.twitter.com/eGgebSp4YV

— Benjamin Dada (@DadaBen_) December 22, 2023

Despite the skepticism, the lifting of the ban aligns with a broader regulatory framework, acknowledging the need for comprehensive guidelines in the rapidly evolving cryptocurrency landscape.

This move by the CBN represents a dynamic shift in Nigeria’s approach to virtual assets, signaling a potential avenue for increased cryptocurrency adoption and participation in the global digital economy.