The Central Bank of Nigeria (CBN) has issued operational guidelines on virtual asset service providers (VASPs) to all banks and other financial institutions (OFIs).
The guidelines were released on Friday and in a circular dated December 22, 2023. It was signed by Haruna Mustapha, CBN’s director of financial policy and regulation.
The CBN defines VASPs as any entity that conducts exchanges of virtual assets (cryptocurrencies) and fiat currencies, as well as transfers of virtual assets.
The development represents a departure from the CBN’s initial stance, which restricted crypto transactions.
The CBN issued a circular in February 2021 instructing deposit money banks (DMBs), non-bank financial institutions (NBFIs), and OFIs to close accounts of individuals or entities involved in cryptocurrency transactions within their systems.
Furthermore, the regulator warned local financial institutions not to deal in crypto assets or facilitate payments for crypto exchanges.
The ban was imposed due to concerns about money laundering (ML), terrorism financing (TF), cybercrime, and cryptocurrency volatility.
However, in its most recent circular, the CBN directed all banks and OFIs to provide cryptocurrency services.
According to the regulator, commercial banks must fully comply with the provisions of the VASP guidelines.
The circular reads:
“Current trends globally have shown that there is a need to regulate the activities of virtual assets service providers (VASPs) which include cryptocurrencies and crypto assets.”
“Following this development, the Financial Action Task Force (FATF) in 2018 also updated its Recommendation 15 to require VASPs to be regulated to prevent misuse of virtual assets for ML/TF/proliferation of weapons of mass destruction (PF).
Furthermore, Section 30 of the money laundering (Prevention and Prohibition) Act, 2022 recognizes VASPs as part of the definition of a financial institution.
”In addition, the Securities and Exchange Commission (SEC) in May 2022 issued rules on Issuance, offering, and custody of digital assets and VASPs to provide a regulatory framework for their operations in Nigeria.
“In view of the foregoing, the CBN hereby issues this guidelines to guide to financial institutions under its regulatory purview in respect of their banking relationship with VASPs in Nigeria.
“The guidelines supersedes the CBN’s circulars referenced FPR/DIR/GEN/CIR/06/010 of January 12, 2017, and BSD/DIR/PUB/LAB/014/001 of February 5, 2021, on the subject.
“However, banks and other financial institutions are still prohibited from holding, trading, and/or transacting in virtual currencies on their account.”
President Muhammadu Buhari signed the finance bill into law on May 28, 2023.
The law imposed a 10% tax on gains on the sale of digital assets, including cryptocurrency.