The Central Bank of Nigeria (CBN) has lifted the ban that prevented banks from opening accounts for cryptocurrency service providers in the country.
According to a December 22 circular sent to banks, applicable financial institutions can now open accounts for Virtual Asset Service Providers (VASPs) registered with the Securities and Exchange Commission (SEC), in compliance with rigorous know-your-customer (KYC) checks and to combat money laundering.
CBN eases crypto ban
In February 2021, the CBN imposed a ban on cryptocurrency trading activities, ordering the closure of associated bank accounts. The ban followed earlier warnings against the use of unregulated cryptocurrencies and the role of these assets in money laundering and terrorist financing. The central bank sought to mitigate the risks and vulnerabilities that abounded in the absence of regulations and consumer protection measures.
The ban has disrupted Nigeria’s rapidly growing crypto market over the past two years as users faced difficulties buying and selling their assets.
However, the CBN has realized the need to regulate the activities of VASPs as current global trends show the mass recognition and adoption of crypto assets. To this end, the central bank has issued guidelines for establishing claim relationships between banks and VASPs.
“In view of the above, the CBN hereby issues these guidelines to provide guidance to financial institutions within its regulatory jurisdiction in relation to their banking relationships with VASPs in Nigeria. The Guidelines replace CBN circulars referenced FPR/DIR/GEN/CIR/06/010 dated January 12, 2017 and BSD/DIR/PUB/LAB/014/001 dated February 5, 2021 on the subject,” Haruna Mustafa said , the director of the Department of Financial Policy and Regulation.
Banks are still prohibited from holding cryptocurrencies
Although banks and relevant financial institutions can now open designated accounts for VASPs, they are still prohibited from holding, trading or transacting cryptocurrencies from their accounts.
As Nigeria attempts to put regulatory measures in place, the local crypto sector continues to thrive. A September survey by software company Web3 Consensys found that the country led in crypto awareness across continents, with 99% of its citizens having heard of the asset class and 91% being ready to invest.
Meanwhile, the Nigerian Federal Ministry of Communications and Digital Economy (FMCDE) approved the National Blockchain Policy earlier this year to pave the way for the formal use of blockchain technology in the country.
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