The Central Bank of Nigeira (CBN) recently released the guidelines for operating bank accounts for cryptocurrency service providers and users, nearly three years after it restricted banks from operating accounts for them.
In a circular issued by the CBN director, Financial Policy and Regulation department, Haruna Mustafa, the apex bank said it has issued a guideline to provide guidance to financial institutions under its regulatory purview in respect of their banking relationship with Virtual Assets Service Providers (VASPs) in Nigeria.
The CBN in February 2021 issued a circular restricting banks and other financial institutions from operating accounts for cryptocurrency service providers in view of the money laundering and terrorism financing (ML/TF) risks and vulnerabilities inherent in their operations as well as the absence of regulations and consumer protection measures.
However, in the circular issued to all banks and other financial institutions, the CBM said, “Current trends globally have shown that there is 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 tts Recommendation 15 to require VASPs to be regulated to prevent misuse of virtual assets for MLU/TF/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.”
The Guideline which supersedes the CBN’s circulars referenced FPR/DIR/GENICIR/06/010 of January 12, 2017, and BSD/DIR/PUB/LAB/014/001 of February 5, 2021, on the subject, however, prohibits banks and other financial institutions from holding, trading and/or transacting in virtual currencies on their own account.
According to the guidelines, there would be no cash withdrawals on accounts that are linked to virtual assets. Also, issuance of third party cheques by accounts linked to virtual assets would also not be allowed as only transfers into other or designated accounts would be allowed.
Transactions on virtual assets bank accounts would also be through managers cheque. This is asides the settlement of virtual and digital assets transactions. The guideline also stipulated that banks are to open special accounts in accordance with the guideline which shall be sole for the purpose of transactions on virtual and digital assets “and not for any other purpose.”
Asides from providing designated settlement accounts and settlement services, the accounts are also to serve as channels for foreign exchange flows and trade. This is as a copy of certificate of capital importation is part of the documents required to open the accounts.
The guideline also stipulates that banks and financial institutions “shall monitor on continuous basis, all activities conducted in designated accounts opened in accordance with these guidelines. Financial institutions shall at the end of every month not later than the 10th of the following month submit to the relevant supervisory department of the CBN data and other information on designated account.”
Thus banks and financial institutions are expected to submit on a monthly basis, the number of accounts opened, the value and volume of transactions on each account, details of the counter parties to the transactions , incidence of fraud or theft as well and number of customer complaints and remedial measures taken.
The CBN in February 2021 issued a circular restricting banks and other financial institutions from operating accounts for cryptocurrency service providers in view of the money laundering and terrorism financing (ML/TF) risks and vulnerabilities inherent in their operations as well as the absence of regulations and consumer protection measures.
However, in the circular issued to all banks and other financial institutions, the CBM said, “Current trends globally have shown that there is 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 tts Recommendation 15 to require VASPs to be regulated to prevent misuse of virtual assets for MLU/TF/PF. Furthermore, Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022 recognises VASPs as part of the definition of a financial institution.”
