The Central Bank of Nigeria (CBN) has made a significant U-turn on its stance regarding cryptocurrency transactions in the country. In a circular dated December 22, 2023, the apex bank instructed banks to disregard its previous ban on crypto transactions, signaling a major policy shift.
The circular, titled ‘Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS)’, was signed by Haruna Mustafa, the Director of the Financial Policy and Regulation Department at the CBN.
Citing evolving global trends, the CBN acknowledged the necessity for cryptocurrency regulation. It emphasized the need to address the risks associated with money laundering, terrorism financing, and the absence of adequate consumer protection measures in crypto operations.
The apex bank highlighted that the new guidelines supersede its previous directives from January 12, 2017, and February 5, 2021. It clarified that while banks and financial institutions are still barred from holding, trading, or transacting in virtual currencies on their own account, they must adhere to the new guidelines promptly.
The CBN’s decision marks a substantial departure from its earlier circular dated February 5, 2021, which expressly prohibited banks from engaging in cryptocurrency transactions or facilitating payments for cryptocurrency exchanges.
The move to lift the ban aligns with the evolving international regulatory framework for virtual assets. Notably, the Financial Action Task Force (FATF) updated its Recommendation 15 in 2018 to mandate the regulation of virtual assets service providers (VASPs) to counter the exploitation of virtual assets for illicit activities.
The CBN’s policy reversal is expected to have far-reaching implications for the cryptocurrency landscape in Nigeria, potentially unlocking new opportunities for crypto investors and industry players while bolstering efforts to mitigate financial risks associated with virtual assets.
The CBN’s decision has immediate implications for the financial sector and the broader cryptocurrency ecosystem, underscoring Nigeria’s recognition of the imperative to adapt to the changing global financial landscape while addressing regulatory challenges linked to virtual assets.
This pivotal development underscores the dynamic nature of global financial regulation, as countries navigate the complex interplay between innovation, financial stability, and the imperative to address emerging risks in the digital economy.
