The Nigerian Central Bank has altered its position regarding cryptocurrency assets within the nation.

This was stated according to a circular dated December 22, 2023, with reference number FPR/DIR/PUB/CIR/002/003, titled ‘Circular to all Banks and other Financial Institutions Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPS). It was signed by the apex bank’s Director, Financial Policy and Regulation Department, Haruna Mustafa.

The Central Bank of Nigeria (CBN) mentioned in a circular to financial institutions that it revoked the ban due to global trends indicating the necessity to regulate crypto firms. The Money Laundering Act of 2022, specifically Section 30, now acknowledges crypto firms (referred to as virtual asset service providers or VASPs) as financial entities. Additionally, the CBN cited the guidelines from the Nigerian Securities Exchange Commission (SEC) in 2022 as another factor justifying the need to lift the restriction.

Although banks can now assist with crypto transactions, they are barred from engaging in trading, holding, or conducting transactions involving cryptocurrencies.

In February 2021, the CBN released a circular that limited banks and financial institutions from managing accounts for cryptocurrency service providers due to concerns about the risks associated with money laundering, terrorism financing, the inherent vulnerabilities in their operations, and the lack of regulations and measures for consumer protection.

Yet, recent worldwide patterns indicate the necessity to oversee the operations of virtual asset service providers (VASPs), encompassing cryptocurrencies and crypto assets. Consequently, the Financial Action Task Force (FATF) in 2018 revised its Recommendation 15, mandating the regulation of VASPs to prevent the misuse of virtual assets for money laundering, terrorism financing, and proliferation financing.

Moreover, in May 2022, the Securities and Exchange Commission established regulations regarding the issuance, offering, and safekeeping of digital assets and virtual asset service providers (VASPs). These rules aim to create a structured regulatory framework for their activities within Nigeria.

Considering the preceding points, the CBN is issuing this guideline to offer direction to financial institutions under its regulatory oversight regarding their banking associations with VASPs in Nigeria.

The central bank highlighted that this updated guideline replaces its previous directives outlined in FPR/DIR/GEN/CIR/06/010 dated January 12, 2017, and BSD/DIR/PUB/LAB/014/001 dated February 5, 2021, concerning the subject matter.

The directive mandates that all banks and other financial institutions promptly adhere to the updated guideline issued by the CBN.

Back then, it instructed banks to identify individuals or entities involved in transactions or running cryptocurrency exchanges within their systems and ensure the closure of their accounts.

The Permitted Actions of Nigerian Banks Concerning Crypto Companies

Now, banks have the authorization to initiate bank account openings for crypto companies, also known as VASPs. They can furnish these entities with specified settlement accounts and serve as conduits for foreign exchange transactions and commerce.

However, cryptocurrency firms aiming to engage with banks need authorization from the SEC.

As per SEC regulations, Virtual Asset Service Providers (VASPs) like crypto exchanges need a license, a minimum capital of ₦500 million ($553,000), and registration with the CAC.

For those planning to issue tokens, a white paper submission to the SEC is mandatory, followed by a 30-day waiting period for approval in Nigeria. Banks must collect BVNs (Bank Verification Numbers) of all directors and owners of crypto companies they serve, adhering to strict KYC measures before a VASP can open an account with a bank.

This is indeed good news for crypto traders in Nigeria and is bullish for the crypto market globally as it shows that adoption is increasing.

Hoping for more adoption in other parts of Africa and the world globally.

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