In a groundbreaking development, Nigeria’s Central Bank (CBN) has overturned its strict ban on banks engaging in cryptocurrency transactions, signaling a pivotal shift in the country’s financial landscape. Initially enforced almost two years ago, the ban barred financial institutions from participating in digital currency-related activities.
In a recent X post, Tech Journalist Abubakar shed light on the CBN’s latest circular, issued on December 22, which retracts the previous stringent restrictions imposed in 2021. The new directive offers guidelines for Nigerian banks to support cryptocurrency transactions while enforcing rigorous customer KYC (Know Your Customer) and anti-money laundering protocols.
Acknowledging the surging global demand and adoption of cryptocurrencies, the CBN justified its decision to lift the ban, recognizing the inadequacy of maintaining stringent constraints on financial institutions in the face of evolving trends. This move aligns with international dynamics emphasizing the regulation of Virtual Assets Service Providers (VASPs), such as cryptocurrencies and crypto assets.
The circular prominently emphasizes the importance of effectively managing and mitigating risks such as money laundering and terrorism financing. This pivotal shift in approach signifies a notable deviation from the directives previously issued by the CBN in both 2017 and 2021.
However, while permitting banking interactions with VASPs, the CBN prohibits banks and financial entities from directly holding, trading, or transacting in virtual currencies through their accounts. This cautious approach underlines Nigeria’s openness to the digital currency revolution while exercising prudence in risk management.
The recently updated guidelines notably incorporate VASPs into the definition of financial institutions, a significant inclusion specified under Section 30 of the Money Laundering Act of 2022. This crucial amendment underscores the pressing requirement for absolute compliance concerning these new designations among all Nigerian banks and financial establishments.
This pivotal CBN policy shift signifies a transformative chapter in Nigeria’s financial history. It reflects the country’s willingness to adapt to evolving global financial trends while maintaining a vigilant stance on managing potential risks in the crypto sphere.
