CBN lifts ban on cryptocurrency, set to provide regulations

BRANDPOWER recalls that the CBN issued a circular in February 2021, restricting banks and other financial institutions from operating accounts for cryptocurrency service providers.

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CBN, lifts ban on cryptocurrency, set to provide regulationsThe Central Bank of Nigeria (CBN) has lifted the ban it imposed two years ago on cryptocurrency transactions in the Nigerian banking system.

The CBN announced the reversal of the policy in a circular by Haruna Mustapha, its Director, Financial Policy and Regulation.

Mustapha said that the apex bank would now provide regulations for financial institutions on how to manage cryptocurrency to avoid misuse.

BRANDPOWER recalls that the CBN issued a circular in February 2021, restricting banks and other financial institutions from operating accounts for cryptocurrency service providers.

The then CBN Governor, Godwin Emefiele, had announced that the restriction was necessary in view of the money laundering and terrorism financing risks posed by cryptocurrency.

Emefiele also said that the vulnerability inherent in cryptocurrency operations, as well as the absence of regulation and consumer protection measures were also responsible for the policy.

According to Mustapha, current global trends have shown that there is need to regulate the activities of Virtual Assets Service Providers (VASPs) which include 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 guidiance to financial institutions under its regulatory purview in respect of their relationship with VASPs in Nigeria.

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“The guidelines supersedes the CBN circular of Feb. 5, 2021on the subject,” the director said confirming the lifting of the ban on cryptocurrency.

He, however, warned that banks and other financial institutions were still prohibited from holding, trading or transacting in cryptocurrencies on their own account.

Cryptocurrency is a digital payment system that doesn’t rely on banks to verify transactions. It’s a peer-to-peer system that can enable anyone anywhere to send and receive payments. Instead of being physical money carried around and exchanged in the real world, cryptocurrency payments exist purely as digital entries to an online database describing specific transactions. When you transfer cryptocurrency funds, the transactions are recorded in a public ledger. Cryptocurrency is stored in digital wallets.