The Central Bank of Nigeria (CBN) has announced that cash withdrawals will be restricted for accounts specifically opened for virtual and digital asset transactions.
Instead, withdrawals from these accounts can only be made through transfers or manager’s cheques, as outlined in the newly issued ‘Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers.’
The bank emphasized that accounts established under these guidelines are exclusively designated for transactions related to virtual or digital assets and should not be utilized for any other purposes.
The guideline read in part, “No cash withdrawal shall be allowed from the account. No third-party cheque shall be cleared from the account. Except for settlement of a virtual/digital assets transaction which shall be done through a transfer to another designated account, the withdrawal shall be only through a managers’ cheque or transfer to an account.”
In a December circular titled ‘Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers,’ marked with reference number FPR/DIR/PUB/CIR/002/003 and signed by Haruna Mustafa, the Director of the Financial Policy and Regulation Department, the banking regulator announced a significant policy shift regarding crypto assets.
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The circular instructed all banks and financial institutions to facilitate crypto transactions.
Under the new policy direction, the bank expressed a more receptive stance towards regulation, departing from its previous approach of restricting crypto assets within the formal banking sector. The accompanying guideline, published alongside the circular, outlines the framework for the reintegration of crypto assets into the formal banking sector.
In reaction to the guideline, the CBN said, “The Guidelines shall apply to banks and other financial institutions under the regulatory purview of the CBN.”
Part of the objectives read, “Provide minimum standards and requirements for banking business relationships and account opening for Virtual Assets Service Providers in Nigeria.”
In accordance with the stipulated guidelines, financial institutions are now authorized to engage in various activities related to Virtual Assets Service Providers. These activities include the opening of designated accounts, providing designated settlement accounts and settlement services, serving as channels for FX flows and trade, and any other activity that the Central Bank of Nigeria (CBN) may permit from time to time.
Regarding the process of opening accounts for virtual asset providers, the apex bank emphasized that, starting from the commencement of these Regulations, financial institutions are prohibited from opening or allowing the operation of any account for individuals or entities involved in the virtual/digital assets business unless the account is specifically designated for that purpose and opened in accordance with the guidelines.
Approval from senior management of the financial institution is required for the opening of such designated accounts.
The CBN’s new guidelines also outline a comprehensive list of additional requirements aimed at safeguarding the financial system and customers from uncertainties and fraud risks.
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Emphasizing the importance of compliance with these guidelines, the apex bank underscored that banks failing to adhere to the regulations risk having their licenses suspended.
The document read in parts, “Notwithstanding the powers of the CBN under the BOFIA 2020 and in addition to the use of remedial measures in these Guidelines, the CBN may take any or all of the following sanctions against a Fl, its board of directors, officers or staff for failure to comply with any of the requirements of these Guidelines:
“Prohibition from opening any further designated account; Monetary penalty not below the sum of 2,000,00O.00 against the FIs, members of its board, senior management, and any staff, for any infraction. Suspension of the operating licence of a Fl.”
Upon the CBN’s declaration of a policy change regarding cryptocurrencies, Senator Ihenyen, the Lead Partner and Head of Blockchain and Virtual Assets Practice at Infusion Lawyers, expressed to The PUNCH, “Fortunately, our regulatory bodies will collaborate to guarantee consumer protection and investor safety.”
“Nigeria can no longer afford to keep pushing digital assets underground for obvious economic and security reasons, especially when you are number on in crypto adoption in Africa and a leading market in the globe.”