Nigeria: CBN Reverses Crypto Transaction Ban for Banks with Regulatory Framework

In a recent circular addressed to banks and financial institutions, the Central Bank of Nigeria (CBN) has lifted the restrictions on banks, allowing them to facilitate crypto transactions. The decision comes in response to global trends emphasizing the need to regulate the activities of crypto companies.

The circular highlights the significance of Section 30 of the Money Laundering Act of 2022, which now recognizes crypto companies, referred to as Virtual Asset Service Providers (VASPs), as financial entities. Additionally, the CBN cites guidelines issued by the Nigerian Securities Exchange Commission (SEC) in 2022 as a crucial factor in revisiting the crypto transaction restrictions.

While banks are now permitted to facilitate crypto transactions, it’s important to note that they remain prohibited from engaging in the trading, holding, or transacting of cryptocurrencies.

Authorized Actions for Nigerian Banks Regarding Crypto Companies:

1. Account Services: Banks can open bank accounts for crypto companies (VASPs) and provide them with designated settlement accounts.
2. FX Flows and Trade: Banks are authorized to act as channels for foreign exchange (FX) flows and trade involving crypto companies.
3. Licensing Requirements: Crypto companies intending to utilize banking services must obtain a license issued by the SEC to operate. The SEC mandates VASPs, including crypto exchanges, to pay a minimum paid-up capital of ₦500 million ($553,000) and register duly with the Corporate Affairs Commission (CAC).
4. Token Issuance: Crypto companies wishing to issue tokens must submit a white paper to the SEC and undergo a 30-day waiting period to determine if the tokens can be launched in Nigeria.
5. Know Your Customer (KYC) Measures: Banks are obligated to obtain the Bank Verification Number (BVN) of all directors and owners of crypto companies availing their services. The guidelines include stringent KYC measures before a VASP can establish an account with a bank.

This regulatory shift signals the CBN’s recognition of the evolving crypto landscape and its commitment to incorporating effective oversight. As the financial landscape continues to embrace digital assets, the revised framework aims to strike a balance between facilitating crypto transactions and ensuring regulatory compliance.