In a significant policy shift, the Central Bank of Nigeria (CBN) has announced the lifting of the ban on cryptocurrency transactions carried out through banks. The decision was communicated through a circular titled “GUIDELINES ON OPERATIONS OF BANK ACCOUNTS FOR VIRTUAL ASSETS SERVICE PROVIDERS (VASPs),” issued to all banks and financial institutions.
The CBN had initially imposed a ban in February 2021, citing concerns about money laundering, terrorism financing, and the lack of regulatory frameworks for virtual assets. However, recognizing the global trend towards regulating virtual asset service providers (VASPs), including cryptocurrencies, the CBN has revisited its stance.
The circular outlines that the Financial Action Task Force (FATF) emphasized the need for VASPs regulation to prevent the misuse of virtual assets for illicit activities. Moreover, recent legislative developments, such as Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022, and rules issued by the Securities and Exchange Commission (SEC) in May 2022, have acknowledged and provided a regulatory framework for VASPs in Nigeria.
The new guidelines supersede previous circulars from 2017 and 2021, but it reiterates that banks and financial institutions remain prohibited from holding, trading, or transacting in virtual currencies on their own account. Financial institutions are now mandated to comply immediately with the provisions of the new guidelines.
This announcement marks a departure from the CBN’s earlier stance when, in 2021, it issued directives instructing all commercial banks and financial institutions to close down bank accounts associated with cryptocurrencies. The ban was a response to perceived risks and vulnerabilities associated with cryptocurrency transactions, as expressed in a letter signed by Bello Hassan, Director of Banking Supervision, and Musa I. Jimoh, Director of Payment Systems Management Department.
In a related development in 2020, Nigeria’s Securities and Exchange Commission (SEC) declared that all virtual crypto assets issued in Nigeria are securities, unless proven otherwise. The SEC mandated the registration of individuals or entities providing blockchain-related and virtual digital asset services, broadening the scope to include advising on cryptocurrencies and rendering custodian or nominee services.
The regulations also specified a three-month window for Digital Assets Token Offerings (DATOs), Initial Coin Offerings (ICOs), and Security Token ICOs to submit necessary documents for registration. Additionally, the SEC outlined the process of registration and possible exemptions for offerings through crowdfunding portals or other exempt methods.
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Charles Rapulu Udoh is a Lagos-based lawyer, who has several years of experience working in Africa’s burgeoning tech startup industry. He has closed multi-million dollar deals bordering on venture capital, private equity, intellectual property (trademark, patent or design, etc.), mergers and acquisitions, in countries such as in the Delaware, New York, UK, Singapore, British Virgin Islands, South Africa, Nigeria etc. He’s also a corporate governance and cross-border data privacy and tax expert. As an award-winning writer and researcher, he is passionate about telling the African startup story, and is one of the continent’s pioneers in this regard.