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The Central Bank of Nigeria (CBN) has issued new guidelines on the regulation of bank accounts for Virtual Assets Service Providers (VASPs), commonly known as cryptocurrency. These guidelines establish minimum standards and requirements for banking relationships and account openings for VASPs, aiming to monitor the activities of banks and Other Financial Institutions (OFIs) in offering services to Securities and Exchange Commission (SEC) licensed VASPs/Digital Assets (DA) entities within the country.
The framework, which comes after the lifting of the previous ban on banks operating accounts for crypto assets, maintains the restriction on banks from holding or trading crypto assets on their own accounts. Mr. Haruna Mustafa, Director of the Financial Policy and Regulation Department at the CBN, emphasized in a circular to banks and financial institutions that they are still “prohibited from holding, trading, and/or transacting in virtual currencies on their own account.”
Under the new guidelines, financial institutions are prohibited from opening or allowing the operation of any account for conducting virtual/digital assets business unless the account is specifically designated for that purpose and opened in accordance with the provided guidelines.
Eligible entities for registering bank accounts for virtual assets include commercial and merchant banks, Payment Service Providers (restricted to those involved in settlement for third parties), and entities registered by the SEC for digital/virtual assets services. This encompasses VASPs, digital asset custodians, digital asset offering platforms, digital asset exchanges, DAX operators, and any other entities categorized by the CBN.
Financial institutions are mandated to establish transaction limits for each designated account in line with the guidelines and risk assessment criteria. The limits are required to be prudent and proportionate to the volume of cash moved by the account holder and the associated risks of the account holder’s business.
The guidelines also specify that designated accounts should not be run on concession, and banks should not enter into any concession agreements/arrangements with designated account holders. These accounts are subject to maximum transaction charges as outlined in the CBN Guide to Charges for Banks and Other Financial Institutions.
Other restrictions on VASPs’ bank accounts include no cash withdrawals, no clearance of third-party cheques, and utilization solely for virtual/digital assets transactions. Transfers from the Naira position of VASP platform users into their bank accounts should not occur more than twice in a quarter.
The CBN outlines a monetary penalty not below N2 million against banks, board members, senior management, and staff for any infraction. Sanctions for failure to comply with the requirements may include prohibiting further designated account openings and suspension of operating licenses.
This regulatory move follows the global trend of regulating virtual asset service providers to address money laundering, terrorism financing, and other risks associated with their operations. The CBN acknowledged the need for regulation in the face of current global trends while highlighting that the guidelines supersede previous circulars on the subject. However, the prohibition on banks from holding, trading, and transacting in virtual currencies on their own account remains unchanged.
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