CBN Reverses Ban on Cryptocurrency Transactions

By Iyojo Ameh

The Central Bank of Nigeria (CBN) has made a pivotal decision to rescind its earlier ban on cryptocurrency transactions within the country.

The CBN officially announced this reversal in a circular dated December 22, 2023, marked with reference number FPR/DIR/PUB/CIR/002/003, signed by Haruna Mustafa, Director of the Financial Policy and Regulation Department.

Recall that the apex bank had imposed a ban on cryptocurrency transactions in February 2021 due to concerns about money laundering and terrorism financing risks, as well as the absence of regulatory frameworks and consumer protection measures.

However, in light of evolving global trends and regulatory developments, the CBN acknowledged the necessity to regulate Virtual Assets Service Providers (VASPs).

The Financial Action Task Force (FATF) had updated its Recommendation 15 in 2018, mandating the regulation of VASPs to prevent misuse of virtual assets for illicit activities. The Money Laundering (Prevention and Prohibition) Act, 2022 also recognized VASPs as part of the financial institution definition.

The CBN’s new guideline aims to offer direction to financial institutions under its regulatory oversight regarding their relationships with VASPs operating in Nigeria. Notably, this guideline supersedes previous directives, particularly those referenced in circulars FPR/DIR/GEN/CIR/06/010 of January 12, 2017, and BSD/DIR/PUB/LAB/014/001 of February 5, 2021.

Despite this reversal, the CBN emphasized that banks and financial institutions are still barred from engaging in the trading, holding, or transacting of virtual currencies on their own accounts.

Under the new directive, banks and financial institutions are mandated to adhere promptly. The CBN reminded these entities of its previous circular, BSD/DIR/PUB/LAB/014/001, dated February 5, 2021, urging them to identify and close the accounts of individuals or entities involved in cryptocurrency transactions.