CBN’s Reversal on Crypto Transactions Sparks Optimism Among Industry Experts

The Central Bank of Nigeria (CBN) has reversed its stance on cryptocurrency transactions, a decision that has ignited optimism and enthusiasm among industry experts.

The banking regulator, in a circular dated December 22, 2023, and signed by the Director of the Financial Policy and Regulation Department, Haruna Mustafa, rescinded its earlier directive instructing banks to avoid dealings with entities involved in cryptocurrency transactions.

The circular, titled ‘Circular to all banks and other Financial Institutions guidelines on operations of bank accounts for Virtual Assets Service Providers,’ elucidates the CBN’s shift in perspective, citing the evolving global trends in digital currencies.

This marks a departure from the CBN’s previous position in February 2021, where it had imposed restrictions on banks and financial institutions, citing concerns related to money laundering, terrorism financing risks, and the absence of regulatory measures for consumer protection.

The regulatory landscape has undergone significant changes, with the Securities and Exchange Commission (SEC) issuing rules in May 2022 to provide a regulatory framework for the operations of Virtual Assets Service Providers (VASPs) in Nigeria.

The CBN’s latest guideline now supersedes its previous directives, emphasizing the need for financial institutions to establish banking relationships with VASPs in Nigeria.

While the new guideline permits such relationships, it maintains the prohibition on banks and financial institutions from holding, trading, or transacting in virtual currencies on their own account.

This nuanced approach is seen as a positive step by industry insiders.

Chimezie Chuta, the Founder and Coordinator of Blockchain Nigeria User Group, welcomed the regulatory development, expressing optimism about its potential benefits.

He highlighted the newfound ability for the government to tax cryptocurrency transactions, signaling a positive economic impact.

Chuta emphasized the importance of regulation, enabling policymakers and regulators to take pride in steering the industry in the right direction.

Senator Ihenyen, Lead Partner and Head of Blockchain and Virtual Assets Practice at Infusion Lawyers, commended the regulatory shift, noting that by regulating virtual assets instead of resisting them, regulators can ensure the safety and soundness of the financial system.

Ihenyen highlighted the need for collaborative efforts among regulators to protect consumers and investors.

Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprises, stressed the importance of an adequate regulatory framework to address money laundering concerns.

The industry now anticipates a more transparent and regulated crypto environment, offering potential economic benefits and fostering security within the financial system.

The CBN’s decision is seen as a strategic move in acknowledging the prevalence of digital assets and aligning Nigeria with global developments in the cryptocurrency space.