The Central Bank of Nigeria has introduced new guidelines regulating cryptocurrency transactions within Deposit Money Banks (DMBs) and other financial institutions.
This action comes subsequent to the removal of the ban on cryptocurrency transactions within the Nigerian banking system, which was enforced two years ago under the leadership of former CBN Governor, Godwin Emefiele.
In February 2021, the CBN had issued a circular imposing restrictions on banks and financial institutions from managing accounts for cryptocurrency service providers. This decision was primarily driven by concerns related to money laundering, risks associated with terrorism financing, the absence of regulatory frameworks, and insufficient consumer protection measures.
However, in the latest regulatory update titled, ‘Guideline On Operation of Bank Account For Virtual Assets Service Providers(VASPs),’ the CBN stipulated that banks and financial entities are still forbidden from owning, trading, or transacting in virtual currencies within their own accounts.
According to the CBN, under these Regulations, financial institutions are prohibited from opening or authorizing the operation of any account intended for conducting virtual/digital assets business unless explicitly designated and established in accordance with the specified Guidelines.
The guideline emphasizes the exclusive use of these designated accounts solely for virtual/digital asset transactions and forbids any other purposes.
Additionally, cash withdrawals and third-party check clearances from these accounts are prohibited, except for settlements related to virtual/digital assets transactions, which must occur through a transfer to another specified account or via a Manager’s Cheque.
Furthermore, the guideline elaborates on the requirement for designated settlement accounts for Securities and Exchange Commission’s (SEC) Virtual Assets Service Providers/Digital Assets (VASPs/DA) entities, which will be opened by financial institutions with the CBN’s approval. These settlement accounts will handle all Naira positions of individuals within the VASPs/DA platforms.
The CBN specifies that these settlement accounts, along with any associated linked accounts for managing settlement funds, will not accrue interest. Additionally, transaction details from the VASP platform leading to settlements in the designated accounts must be accessible online in real-time to Financial Institutions (FIs). The credited amount to the designated settlement account will fund Naira positions within the VASP/DA platforms.
Any violation of these regulations will result in penalties of not less than N2 million, as stipulated by the CBN.