The Central Bank of Nigeria (CBN) has officially lifted its previous banking restrictions on virtual asset service providers (VASPs), including cryptocurrency exchanges. This reversal comes after a 2021 directive that barred financial institutions from facilitating crypto-related transactions. The policy change was communicated through a recent circular, signaling a significant shift in Nigeria’s approach to the crypto industry and its regulatory framework.
New Approach to Crypto by the Central Bank of Nigeria
Nigeria has taken a pivotal step away from its 2021 mandate that compelled banks to shut down accounts tied to cryptocurrency, which was originally enforced due to apprehensions over money laundering and financing of terrorism. The absence of a regulatory framework at that time left retail consumers unprotected.
Recent shifts in the global regulatory landscape have influenced the Central Bank of Nigeria (CBN) to ease these stringent measures.
A recent dialogue with a cryptocurrency exchange executive highlighted a positive outlook, suggesting this regulatory relaxation heralds a prosperous era for Nigeria’s burgeoning cryptocurrency market.
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This development opens the door for growth and innovation within the local crypto industry, although the CBN continues to proceed with caution regarding cryptocurrency operations.
Nigeria’s Banking Sector Adjusts to New Crypto Framework
The Central Bank of Nigeria (CBN) has delineated that while banks in the country are not authorized to engage in holding, trading, or direct transactions with virtual currencies, they can facilitate transactions for crypto under the newly established regulations. This marks a significant move in recognizing virtual asset service providers (VASPs) within the legal framework, particularly under Section 30 of the Money Laundering Act of 2022.
In alignment with directives from the Financial Action Task Force (FATF), which calls for the regulation of VASPs to curb money laundering and terrorism financing (ML/FT) risks, Nigeria’s legislation now requires these service providers to be under regulatory oversight similar to that of financial institutions.
Nigeria’s Regulatory Bodies Embrace Crypto Innovations
Earlier in the year, the Nigerian Securities and Exchange Commission began deliberating on digital asset regulations that would permit token listings. The Commission has since established guidelines governing the issuance, offering, and custody of digital assets, including regulations for VASPs.
With the CBN’s latest guidelines, the trajectory seems to be veering toward a more open regulatory environment for cryptocurrencies in Nigeria, suggesting a shift from restrictive policies to ones that foster controlled innovation and growth in the digital asset space.