CBN Introduces New Guidelines On VASPs Banking Operations
The Central Bank of Nigeria (CBN) has announced the cancellation of its previous restrictions on banks and other financial institutions regarding operating accounts for virtual asset service providers (VASPs). This move signifies a significant development as the Apex Bank seeks to establish new regulations for cryptocurrencies in a country with a population of over 200 million.
In a circular released on December 22, the CBN clarified that its initial ban on banking operations by VASPs in February 2021 was motivated by concerns about money laundering, terrorism financing, and the lack of regulations and investor protection measures in Nigeria’s crypto industry.
However, the CBN now recognizes that supervising the activities of VASPs is a more effective approach than an outright ban. This aligns with global trends and recommendations from financial regulatory institutions like the Financial Action Task Force (FATF), which advocates for regulating VASPs to minimize illicit use of cryptocurrencies.
The CBN also acknowledges that VASPs are now considered financial institutions under the ML (Prevention and Prohibition) Act 2022. Additionally, the Nigerian Securities and Exchange Commission (SEC) has already implemented a regulatory framework for VASP activities and digital asset issuance, offering, and custody.
As a result, the CBN has lifted its ban on bank account operations by VASPs and issued new guidelines for all financial institutions dealing with these crypto companies.
Nigerian Banks Still Banned From Dealing With Cryptocurrencies – CBN
While the CBN has removed restrictions on banking activities by VASPs, it still prohibits banks and other financial institutions in Nigeria from directly transacting with cryptocurrencies.
This ban prevents institutions under the CBN’s regulatory oversight from holding or trading virtual assets on their personal accounts. It indicates that the Nigerian government is exercising caution in its engagement with the crypto industry.
Nigeria is one of the rapidly growing crypto hubs globally, ranking as the sixth-highest nation in terms of cryptocurrency usage, according to data from Triple-A, a crypto analytics site. Triple-A estimates that over 22 million Nigerians, representing 10.31% of the population, are crypto users, despite only 51% having internet access.
The recent policy changes by the CBN regarding VASPs and the country’s high inflation rates and depreciation of its legal tender, the Naira, are likely to further boost crypto adoption in Nigeria.
Hot Take: Nigeria Embraces Crypto Regulation
The Central Bank of Nigeria (CBN) has taken a significant step by lifting its ban on bank account operations by virtual asset service providers (VASPs). This move demonstrates the CBN’s recognition of the importance of regulating rather than outright banning cryptocurrencies.
By aligning with global trends and recommendations from financial regulatory institutions like the FATF, Nigeria aims to minimize illicit activities such as money laundering and terrorism financing while fostering a secure environment for crypto transactions.
While Nigerian banks are still prohibited from directly transacting with cryptocurrencies, this development paves the way for increased crypto adoption in Nigeria. With its large population and growing interest in digital assets, Nigeria has the potential to become a major player in the global crypto market.
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