Banks to offer crypto services after CBN reverses ban order

After two years of pressure from crypto enthusiasts and companies, the Central Bank of Nigeria (CBN) has finally decided to lift  the restrictions it previously placed on banks from facilitating cryptocurrency transactions.

The CBN made the announcement in a circular sent to banks and other financial institutions, explaining that the current global trends and developments in the crypto industry have led them to change their stance on the matter. The CBN has also released new guidelines for banks and other financial institutions on how to operate with entities that provide crypto services.

It noted that the Money Laundering Act of 2022 now explicitly recognises crypto companies as “virtual asset service providers” (VASPs), which are considered to be financial companies under the Act. This recognition means that crypto companies will be subject to the same regulations as other financial institutions in Nigeria.

The CBN also referenced the guidelines for crypto companies released by the Nigerian Securities Exchange Commission (SEC) in 2022. These guidelines provide a framework for the regulation of crypto companies in Nigeria, and are seen as a key step towards bringing crypto into the formal financial sector.

However, the CBN made it clear that even with the lifting of the ban on banks, banks are still prohibited from trading, holding or transacting in cryptocurrencies. This means that while banks can provide financial services to crypto companies, they cannot themselves engage in any crypto-related activities.

The CBN’s circular went on to state that banks are now allowed to open bank accounts for crypto companies (VASPs), as well as provide them with designated settlement accounts. This means that crypto companies can now use banks to settle transactions and exchange currencies.

However, it is important to note that crypto companies must have a licence issued by the SEC to operate in Nigeria. This licence is designed to ensure that crypto companies are operating in compliance with the law, and that they have the necessary safeguards in place to protect consumers.

The CBN stated that the SEC’s regulations require crypto companies (VASPs) to have a minimum paid-up capital of N500 million ($553,000). Additionally, crypto companies that wish to issue tokens must first submit a white paper to the SEC and wait 30 days for approval. This is to ensure that all crypto-related activities are properly regulated and in compliance with the law.

The CBN’s circular also made it clear that banks should not allow their customers to use their accounts to send or receive funds from unlicensed crypto companies. This is to ensure that all crypto-related transactions are tracked and regulated.

The CBN’s circular also stated that banks are required to obtain the Bank Verification Number (BVN) of all directors and owners of crypto companies that use their services. The BVN is a unique identifier assigned to every Nigerian bank account holder, and is used to verify the identity of individuals for financial transactions.

In addition to this, the CBN’s circular outlines other stringent Know Your Customer (KYC) measures that banks must follow when dealing with crypto companies. This includes verifying the identities of all directors and owners, and conducting due diligence on all transactions.