CBN Ends Prohibition on Cryptocurrency Transactions

The Central Bank of Nigeria (CBN) has issued operational guidelines on virtual asset service providers (VASPs) to all banks and other financial institutions (OFIs), marking a departure from its previous stance that restricted cryptocurrency transactions. The guidelines, released on December 22, 2023, in a circular signed by Haruna Mustapha, CBN’s director of the financial policy and regulation department, define VASPs as entities engaged in the exchange between virtual assets (cryptocurrencies) and fiat currencies, as well as transfers of virtual assets.

The CBN had previously issued a circular in February 2021, instructing deposit money banks (DMBs), non-bank financial institutions (NBFIs), and OFIs to close accounts associated with cryptocurrency transactions. The regulatory body cited concerns over money laundering, terrorism financing, cybercrime, and cryptocurrency volatility as reasons for the ban.

However, the recent circular directs all banks and OFIs to engage in cryptocurrency services, emphasizing that commercial banks must fully comply with the provided guidelines on VASP. The CBN acknowledged the global trend of regulating virtual asset service providers, aligning with the Financial Action Task Force’s (FATF) 2018 Recommendation 15 and the provisions of the money laundering (Prevention and Prohibition) Act, 2022. The Securities and Exchange Commission (SEC) also issued rules in May 2022 to provide a regulatory framework for the operations of digital assets and VASPs in Nigeria.

Despite this shift, the circular maintains the prohibition on banks and other financial institutions from holding, trading, and transacting in virtual currencies on their accounts. Additionally, the finance bill signed into law by President Muhammadu Buhari on May 28, 2023, introduced a 10 percent tax on gains from the disposal of digital assets, including cryptocurrency.