The Central Bank of Nigeria (CBN) has made a significant decision to lift the ban on transactions in cryptocurrencies. This means that banks and other financial institutions are now allowed to provide services to cryptocurrency exchanges and dealers, also known as Virtual Assets Providers (VAPs).

According to the CBN, financial institutions are now permitted to open accounts for VAPs, provide them with designated settlement accounts and settlement services, act as channels for foreign exchange flows and trade, and engage in any other activity that may be permitted by the CBN from time to time. However, the CBN has specified that bank accounts opened for VAPs cannot be used for cash withdrawal and third-party cheque transactions.

The CBN has also emphasized that banks are still prohibited from holding or transacting in cryptocurrencies on their own account. This directive was announced by the Director of Financial Policy and Regulation at the CBN, Haruna Mustafa, in a circular titled "Guidelines on Operations of Bank Account for Virtual Assets Providers (VAPs)".

The circular explained that the decision to lift the ban on cryptocurrency transactions was influenced by global trends and the need to regulate the activities of virtual assets service providers (VASPs), including cryptocurrencies and crypto assets. The Financial Action Task Force (FATF) updated its Recommendation 15 in 2018 to require VASPs to be regulated to prevent the misuse of virtual assets for money laundering, terrorism financing, and proliferation financing.

Furthermore, the CBN pointed out that Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022 recognizes VASPs as part of the definition of a financial institution. Additionally, the Securities and Exchange Commission (SEC) issued Rules on Issuance, Offering, and Custody of Digital Assets and VASPs to provide a regulatory framework for their operations in Nigeria.

In light of these developments, the CBN has issued new guidelines to provide guidance to financial institutions under its regulatory purview regarding their banking relationship with VASPs in Nigeria. These guidelines supersede the CBN's previous circulars on the subject. However, banks and other financial institutions are still prohibited from holding, trading, and/or transacting in virtual currencies on their own account.

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