Key Takeaways
- CBN noted the increased adoption of crypto makes it necessary for banks to facilitate transactions in cryptocurrency
- Banks are banned from holding or conducting transactions in cryptocurrency using their own accounts.
In a groundbreaking policy shift, the Central Bank of Nigeria (CBN) has decided to lift restrictions on Nigerian banks engaging in cryptocurrency transactions, marking a significant development in the country’s financial landscape.
This move comes nearly two years after the CBN imposed a comprehensive ban on such activities, and it underscores the evolving nature of the regulatory environment in response to the dynamic crypto landscape.
The circular, dated December 22, 2023, signals the apex bank’s acknowledgment of the increasing global demand and adoption of cryptocurrencies. It recognizes the need to regulate the activities of Virtual Asset Service Providers (VASPs), aligning with international standards set by the Financial Action Task Force (FATF).
The move is also consistent with guidelines issued by the Securities and Exchange Commission (SEC) in May 2022, providing a regulatory framework for digital assets and VASPs in Nigeria.
While heralding this regulatory shift, the CBN reiterated that banks and financial institutions remain prohibited from holding, trading, or conducting transactions in cryptocurrency using their own accounts. However, the circular provides detailed guidelines for the banking industry on establishing accounts for VASPs. These guidelines aim to ensure robust risk management practices within the industry concerning the activities of licensed VASPs.
Nigeria, known for having one of the highest rates of cryptocurrency adoption globally, is taking a pragmatic step toward embracing the burgeoning sector. The move is seen as a response to the changing dynamics and growing acceptance of cryptocurrencies worldwide.
Despite these regulatory adjustments, the central bank’s directive underscores a cautious approach by prohibiting banks from directly engaging in cryptocurrency transactions. The focus remains on facilitating secure and regulated channels for VASPs to operate within the Nigerian financial ecosystem.
In addition to the regulatory changes, stakeholders, including the local blockchain industry, are urging the government to implement further regulations. Calls for a comprehensive regulatory framework aim to accelerate the integration of blockchain technology across various sectors of the economy.
