The Central Bank of Nigeria (CBN) has lifted the restriction on banks from facilitating crypto transactions.
The Central Bank of Nigeria (CBN) has lifted the restriction on banks from facilitating crypto transactions.
The CBN has also released guidelines for banks and other financial institutions when engaging with crypto services.
In 2021, the CBN banned financial institutions from engaging in crypto related activities.
This was revealed in a circular sent to banks and other financial institutions on Friday.
According to the apex bank, the ban was lifted because current global trends have shown that there's a need to regulate the activities of virtual assets service providers (VASPs) which include cryptocurrency and crypto assets.
Also, the CBN said Section 30 of the Money Laundering Act of 2022 now recognises VASPs as part of a financial institution.
Although banks can now facilitate crypto transactions, they are still not allowed to hold, trade, or transact in virtual currencies on their own accounts.
In February 2021, the CBN banned financial institutions from operating accounts for cryptocurrency service providers in view of the money laundering and terrorism financing risk and vulnerabilities inherent in their operations as well as the absence of regulations and consumer protection measures.
The CBN cautioned that severe penalties would be imposed on any bank or financial entity failing to adhere to the directive, and ordered the closure of all accounts operated by the crypto businesses then.
Despite the ban, Nigeria has maintained the lead position globally in terms of cryptocurrency usage and ownership, and awareness.
Now, the CBN has issued guidelines for financial institutions under its regulatory purview in respect of their banking relationship with VASPs in Nigeria.
Guidelines for cryptocurrency operations
According to the CBN, financial institutions including banks are not allowed to permit the operation of any account by any person or entity to conduct the business of virtual/digital assets unless the account is designated for that purpose.
No cash withdrawal shall be allowed from the account, and no third-party cheque shall be cleared from the account. Except for settlement of virtual/digital assets transactions which shall be done through a transfer to another designated account, withdrawals shall be only through a Manager's cheque.
Other strict KYC measures are mandated for VASPs prior to their eligibility to open a bank account.
Crypto companies seeking to utilize banking services must obtain a license from the SEC to operate. According to the SEC, VASPs, including crypto exchanges, must meet a minimum paid-up capital requirement of ₦500 million ($553,000) and complete proper registration with the Corporate Affairs Commission (CAC).
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