In a groundbreaking development, the Central Bank of Nigeria (CBN) has recently introduced comprehensive guidelines to regulate bank accounts associated with Virtual Assets Service Providers (VASPs), commonly known as cryptocurrencies. This strategic framework outlines minimum standards and requirements for banking relationships with VASPs, emphasizing effective monitoring of activities by banks and Other Financial Institutions (OFIs) in facilitating services for SEC-licensed VASPs and Digital Assets (DA) entities within the nation.
The newly established guidelines are a direct response to the lifting of the ban on banks operating accounts for crypto assets. However, it’s crucial to note that banks are still restricted from directly holding or trading in crypto assets themselves.
In a circular addressed to banks and financial institutions, Mr. Haruna Mustafa, Director of the Financial Policy and Regulation Department at CBN, emphasized the ongoing prohibition on banks from holding, trading, or transacting in virtual currencies on their own accounts.
According to the guidelines, financial institutions are now required to open accounts designated specifically for virtual/digital assets, ensuring alignment with the outlined requirements. This includes the eligibility of commercial and merchant banks, Payment Service Providers (involved in third-party settlement), and all SEC-registered entities engaged in digital/virtual asset services.
These entities encompass VASPs, digital asset custodians, digital asset offering platforms, digital asset exchanges, DAX operators, and any other entities categorized by the CBN.
Financial institutions are granted permission, within the permissible activities of each category, to open designated accounts, provide settlement accounts and services, and act as channels for FX flows and trade related to VASPs. The CBN has also mandated the establishment of transaction limits for designated accounts in line with risk assessment criteria, ensuring prudence and risk mitigation.
Key restrictions have been imposed on VASPs’ bank accounts, including disallowance of cash withdrawals, clearance of third-party cheques, and limitations on transfers from Naira positions, emphasizing the exclusivity of these accounts for virtual/digital asset transactions.
As part of the stringent oversight, financial institutions are directed not to allow the usage or creation of NUBAN accounts by VASPs. The guidelines specify that only accounts that have completed the full Know Your Customer (KYC) process can fund or receive from positions on the VASP/DAs platform.
Under the sanction regime, the CBN has outlined monetary penalties, including a minimum of N2 million, against banks, board members, senior management, and staff for any infractions. Additionally, the CBN reserves the right to enforce measures, such as the prohibition from opening further designated accounts and suspension of operating licenses, for non-compliance with the outlined requirements.
These guidelines mark a pivotal moment in the regulation of cryptocurrency activities in Nigeria, aligning the nation with global trends and ensuring a secure and regulated environment for digital asset transactions.