The Central Bank of Nigeria (CBN) has now canceled its restrictions on banks and other financial institutions in operating accounts for virtual asset service providers (VASPs). This marks an exciting development as the Apex Bank looks to chart a new course for crypto regulations in a nation that has over 200 million people.
CBN Introduces New Guidelines On VASPs Banking Operations
In a circular released on December 22, the CBN explained that its initial ban on banking operations by VASPs in February 2021 was based on the risks of money laundering and terrorism financing (ML/TF) as well as the apparent lack of regulations and investor protection measures in Nigeria’s crypto industry.
CBN Circular on lifting the banking ban on VASPs (crypto companies). pic.twitter.com/tkkiQzEZkw
— Uyoyo (@Uyoyo_O) December 22, 2023
However, the Apex Bank now acknowledges that in line with global trends, the supervision of the activities of VASPs represents a better method of approach than an outright ban.
The CBN references other financial regulatory institutions in Nigeria that have adopted such trend, including the Financial Action Task Force (FATF), which advises that VASPs are better off being regulated to minimize the use of cryptocurrencies in money laundering and terrorism financing.
In backing its ban lift, the CBN also notes that VASPs are now recognized as financial institutions according to the ML (Prevention and Prohibition) Act 2022. In addition, the Nigerian Securities and Exchange Commission (SEC) in May 2022 has already introduced a proper regulatory framework for the activities of VASPs as well as the issuance, offering, and custody of digital assets.
Putting all these developments into consideration, the CBN has now reversed its ban on bank account operations by VASPs, issuing new guidelines that will direct all financial institutions in the nation dealing with these crypto companies.
Nigerian Banks Still Banned From Dealing With Cryptocurrencies – CBN
While the Central Bank of Nigeria may have lifted its restrictions on banking activities by VASPs, the Apex Bank still prohibits banks and other financial institutions in Nigeria from transacting directly with cryptocurrencies.
This ban restricts all institutions under the CBN’s regulatory purview from holding or trading virtual assets on their personal accounts. Thus, it appears that the Nigerian government is still applying some caution in its interaction with the crypto industry.
According to data from the crypto analytics site Triple-A, Nigeria is one of the rapidly evolving crypto hubs in the world, ranking as the 6th highest nation in terms of the use of cryptocurrency.
Triple-A estimates the total number of crypto users in Nigeria to be 10.31% of its total population, representing over 22 million people. This metric is quite impressive considering the fact that only 51% of its citizens have access to the Internet.
This level of crypto adoption in Nigeria is now bound to increase following the CBN’s latest policy on VASPs as well as the constant depreciation of the nation’s legal tender, the Naira, and its high inflation rates.