Key takeaways:
- Nigeria’s central bank issues new guidelines for cryptocurrency accounts,
- Regulations aimed at steering the activities of virtual asset service providers
In a significant policy shift, Nigeria‘s central bank has released updated guidelines for banks handling cryptocurrency accounts, signalling a change in the country’s stance towards digital assets.
The move comes after the central bank recently lifted its ban on banks operating accounts for digital currency service providers, overturning a prohibition that had been in effect.
Nigeria has been a focal point of discussions in the cryptocurrency space, driven by its growing adoption despite the absence of clear regulations. The lack of regulatory clarity had prompted the apex bank to impose a ban on digital asset transactions.
The recent circular from Nigeria’s central bank, accompanied by new guidelines, outlines key changes in the operational aspects of bank accounts for virtual asset service providers.
According to the guidelines, cash withdrawals from accounts dedicated to virtual and digital asset transactions are prohibited. Withdrawals can only be made through transfer or a manager’s cheque.
In a departure from its previous stance, the Central Bank of Nigeria (CBN) has not only lifted the ban on cryptocurrency transactions but has also introduced stringent rules for banks engaging with cryptocurrencies.
The guidelines explicitly prohibit banks from holding or trading virtual assets on behalf of their clients. The use of naira-based accounts is mandated, with no provision for cash withdrawals.
The guidelines state, “No cash withdrawal shall be allowed from the account. No third-party cheque shall be cleared from the account.” Withdrawals can only occur through a transfer to another designated account or via a manager’s cheque.
The central bank emphasizes that these accounts are not permitted to clear third-party checks and are subject to a limit of two quarterly withdrawals. This regulatory framework aims to foster a more transparent environment for the digital currency market under strict control.
Crucially, banks are restricted to facilitating only two withdrawals per quarter from cryptocurrency accounts, a measure implemented to prevent excessive withdrawals and ensure that these accounts are predominantly used for legitimate business purposes.
The guidelines also mandate users on these platforms to provide means of identification for transactions, underscoring the importance of Know Your Customer (KYC) data requirements for centralized and decentralized exchanges seeking approval in the country.
While the central bank is making strides to create a more open environment for the digital currency market, virtual asset service providers (VASPs) operating in the cryptocurrency space must obtain a license from the Nigerian Securities and Exchange Commission in the interim.
Despite these changes, banks and other financial institutions are still prohibited from directly trading, holding, or conducting cryptocurrency transactions on their own accounts. However, they are allowed to assist VASPs with their transactions, marking a nuanced approach by the central bank in navigating the evolving landscape of cryptocurrency regulation in Nigeria.
