INTRODUCTION

The Central Bank of Nigeria (“CBN”) has lifted the restrictions placed on cryptocurrency bank accounts, and issued guidelines to regulate bank accounts for Virtual Assets Service Providers (VASPs). This information was communicated via a circular dated December 22, 2023, titled ‘’Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers’’ (“the Guidelines”), addressed to all banks and Other Financial Institutions (“OFIs”). This move signifies the end of the previous ban on banks and OFIs facilitating crypto transactions in Nigeria, while introducing a comprehensive regulatory framework.

It would be recalled that the CBN in two public releases, (one on January 12, 2017, through a Circular, addressed to banks and OFIs in Nigeria regarding virtual currency operations, and another via a Letter dated February 5, 2021, addressed to all Deposit Money Banks, Non-Bank Financial Institutions, and OFIs),  prohibited the use of virtual currencies such as Bitcoin, Dogecoin, Ripples, Litecoin, etc., as legal tender in Nigeria. The CBN also debarred banks and OFIs from engaging in and facilitating payments on behalf of crypto exchanges. As a result, crypto bank accounts were closed, leading crypto users to explore alternative means for their transactions.

By the Guidelines, the CBN, while sanctioning crypto banking transactions, has emphasised that banks and OFIs are still prohibited from holding, trading, and/or transacting in virtual currencies on their own account. In the same vein, Financial Institutions (“FIs”) under the Guidelines have been defined as banks and OFIs.

We therefore provide in this newsletter, the summary of the key highlights of the Guidelines and the consequential regulatory obligations for FIs and VASPs/Digital Asset (“DA“) entities.

KEY HIGHLIGHTS OF THE GUIDELINES

Definition of Virtual and Digital Assets

The Guidelines define a virtual asset as a digital representation of value that can be transferred, digitally traded and used for payment or investment purposes. The Guidelines, however, restrict virtual assets from including digital representations of fiat currencies, securities and other financial assets that are already covered elsewhere in the Financial Action Task Force (FATF) recommendations.

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