In a notable development, the Central Bank of Nigeria (CBN) reversed its stance on cryptocurrency transactions on December 22nd, 2023, by issuing the “Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers (VASPs).” This decision marks the cessation of the erstwhile ban on financial institutions facilitating crypto transactions in Nigeria and simultaneously introduces a comprehensive regulatory framework.
Since the issuance of the CBN’s directive on February 5th, 2021, through a Letter to all Deposit Money Banks, Non-Bank Financial Institutions, and Other Financial Institutions, cryptocurrency transactions had been excluded from the mainstream Nigerian financial system. Consequently, users and crypto exchanges resorted to peer-to-peer and voucher-based systems to conduct transactions. However, the newly introduced Guidelines signal a pivotal shift, indicating that banks and other financial entities are anticipated to engage in the following activities:
- Facilitating the opening and operation of accounts for VASPs, including crypto exchanges.
- Providing settlement accounts and services, enabling users to utilize their bank accounts for purchasing and receiving payments related to crypto assets.
- Serving as conduits for foreign exchange flows and trade, thereby streamlining the import and repatriation of capital by VASPs.
- Establish adequate risk management systems for combating money laundering, financing of terrorism and countering proliferation financing.
Given that the Guidelines mandate VASPs to furnish a license from the Securities and Exchange Commission (SEC) for the opening of bank accounts, the onus now rests on the SEC to operationalize the Digital Asset Rules it issued in 2022. Furthermore, it is foreseeable that the provisions of the Finance Act 2022, which extends capital gains tax to digital assets, may be enforced in the coming year, now that the regulatory landscape has attained a more definitive status.
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