The Central Bank of Nigeria (CBN) has announced the relaxation of restrictions on cryptocurrency transactions in the country, marking a significant shift in its approach to virtual assets. In a circular dated December 22, 2023, signed by Haruna Mustafa, the Director of the Financial Policy and Regulation Department, the CBN addressed all banks and other financial institutions, providing guidelines on the operations of bank accounts for Virtual Assets Service Providers (VASPs).
The circular stated that the decision to ease restrictions was influenced by global trends emphasizing the need for crypto-regulation. In February 2021, the CBN had issued a circular restricting financial institutions from operating accounts for cryptocurrency service providers due to concerns about money laundering, terrorism financing risks, and the absence of adequate regulations and consumer protection measures.
However, the recent circular acknowledged the evolving landscape globally and recognized the necessity to regulate virtual assets service providers. The Financial Action Task Force (FATF) updated its Recommendation 15 in 2018, urging the regulation of VASPs to prevent the misuse of virtual assets for money laundering, terrorism financing, and proliferation financing.
Additionally, Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022, identified VASPs as part of the definition of a financial institution. The Securities and Exchange Commission (SEC) in Nigeria also played a role by issuing rules in May 2022 to provide a regulatory framework for the issuance, offering, and custody of digital assets and VASPs.
In light of these developments, the CBN issued new guidelines to provide clarity and guidance to financial institutions under its regulatory purview regarding their banking relationships with VASPs in Nigeria. The guidelines supersede previous directives, including those from January 2017 and February 2021, on the same subject.
The relaxation of cryptocurrency transaction restrictions by the CBN suggests a more progressive stance, aligning with global trends and recognizing the importance of regulating the virtual assets space in Nigeria.