By John Ikani
The Central Bank of Nigeria (CBN) has officially lifted the cryptocurrency transaction ban that was instituted two years ago within the Nigerian banking system.
This reversal was disclosed in a circular by Haruna Mustapha, the Director of Financial Policy and Regulation at the CBN.
Mustapha highlighted that the apex bank is now set to establish regulations guiding financial institutions in the proper management of cryptocurrencies to prevent misuse.
In February 2021, the CBN had issued a directive restricting banks and other financial entities from engaging with cryptocurrency service providers.
The then CBN governor, Godwin Emefiele, emphasized that this restriction was vital due to the potential risks associated with money laundering and terrorism financing linked to cryptocurrencies.
Emefiele also underscored the inherent vulnerabilities in cryptocurrency operations and the lack of regulatory and consumer protection measures as driving factors behind the policy.
Mustapha, in the recent circular, acknowledged evolving global trends, emphasizing the necessity to regulate the activities of Virtual Assets Service Providers (VASPs), encompassing cryptocurrencies and crypto assets.
“Following this development, the Financial Action Task Force (FATF) also updated its recommendation to require VASPs to be regulated, to prevent misuse of virtual assets.
“In view of the foregoing, the CBN hereby issues this guidelines to provide guidance to financial institutions under its regulatory purview in respect of their relationship with VASPs in Nigeria.
“The guidelines supersedes the CBN circular of Feb. 5, 2021 on the subject,” the director said.
Despite this positive shift, Mustapha cautioned that financial institutions remain prohibited from independently holding, trading, or transacting in cryptocurrencies.