Central Bank of Nigeria Implements Guidelines for Banks’ Cryptocurrency Accounts
Nigeria’s central bank has introduced a plan for banks to establish cryptocurrency accounts, following the lifting of the ban on financial institutions serving digital asset companies. The regulations that govern the activities of virtual asset service providers (VASPs) impose strict constraints on the utilization of these accounts.
In February 2021, the Central Bank of Nigeria (CBN) prohibited banks and other financial institutions from engaging in or assisting with transactions involving cryptocurrency assets. However, the ban on crypto trading services was recently lifted on December 23, 2023.
The CBN has now removed restrictions on cryptocurrency transactions, reversing its previous stance. The original order in 2021 barred banks from conducting crypto-related transactions. The latest circular, on the other hand, provides clear guidelines that support crypto, but with stringent customer KYC and anti-money laundering checks.
The CBN has taken a cautious approach to cryptocurrencies, initially prohibiting banks from facilitating transactions in digital assets in 2017. However, with the new rules, banks are now allowed to open accounts with cryptocurrency exchanges and other digital asset service providers. The rules specify that these accounts must be denominated in Naira and cannot be linked to personal or business accounts.
There are some restrictions on these accounts, such as the prohibition of cash withdrawals. All transactions must be conducted through electronic transfers or other non-cash methods. Additionally, banks are not allowed to clear third-party checks through crypto accounts, in order to prevent money laundering and other illicit activities. Furthermore, banks can only permit two withdrawals per quarter from crypto accounts, to prevent excessive withdrawals and ensure that the accounts are primarily used for legitimate business purposes.
These new guidelines will have significant implications for the Nigerian cryptocurrency market. On one hand, they provide much-needed regulatory clarity for digital asset service providers, who have been operating in a legal gray area since the initial ban. However, the prohibition on cash withdrawals may cause difficulties for users who need to access their funds. Moreover, the limits on withdrawals may discourage some individuals from using these accounts altogether. Critics argue that these restrictions could hinder innovation in Nigeria’s cryptocurrency sector by making it more challenging for startups to access banking services.
Tags: Crypto Regulations