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CBN releases guidelines for regulating virtual assets in Nigeria

The Central Bank of Nigeria (CBN) has released guidelines for virtual assets in a move that will allow virtual assets service providers (VASPs) which include cryptocurrencies and crypto assets organizations to now open accounts with Nigerian banks.

This came two years after the apex bank had restricted banks and other financial institutions from operating accounts for cryptocurrency service providers.

The guidelines, which were issued to all banks and other financial institutions on Friday, December 22, 2023, stipulate conditions for opening an account by virtual assets providers.

The CBN, however, emphasized that banks and other financial institutions are still prohibited from holding, trading, and/or transacting in virtual currencies on their account.

The apex bank said the issuance of the guidelines was prompted by the current global trends pointing to the need to regulate the activities of virtual VASPs.

The guidelines

Under the guidelines, the CBN said the banks and OFIs are permitted to undertake the following activities in their operations of accounts for VASPs:

Opening of designated accounts;
Provide designated settlement accounts and settlement services;
Act as channels for FX flows and trade; and
Any other activity that may be permitted by the CBN from time to time.

“From the commencement of these Regulations, Fl shall not open or permit the operation of any account by any person or entity to conduct the business of virtual/digital assets unless that account is designated for that purpose and opened in line with the requirement of these Guidelines,” the apex bank stated.

As part of the conditions to open an account for a VASP, the Guidelines stipulate that a designated account can only be opened with the approval of senior management of the financial institution.

“Any application for opening a designated account by a company providing virtual/digital services under these Guidelines shall be supported by the following documents:

Evidence of a valid licence issued by the Securities and Exchange Commission (SEC) for the entity to engage in the business of VASP/DAX/DAOP.
Certified true copy of the memorandum and article of association.
Certified true copy Form CAC2-Statement of share capital and return of allotment of shares.
Certified true copy Form CAC 2.1 particulars of secretary.
Certified true copy Form CAC 3- notice of registered address.

Certified true copy of Form CAC 7-Particulars of Directors
Verifiable registered address of the company
copy of Certificate of Capital Importation (CCI) (where applicable)
Valid means of identification of all the directors, principal officers and beneficial owners of the company.
BVN of all the directors, principal officers and beneficial owners of the company.
Home address of all the directors, principal offices and beneficial owners of the company.”

The CBN had in February 2021 issued a circular restricting banks and other financial institutions from operating accounts for cryptocurrency service providers in view of the money laundering and terrorism financing (ML/TF) risks and vulnerabilities inherent in their operations as well as the absence of regulations and consumer protection measures. It, however, noted that the latest Guidelines supersede the 2021 circular.

FATF’s guidelines

The CBN’s guidelines take a cue from the 2019 recommendations of the Financial Action Task Force (FATF), an independent inter-governmental body that develops and promotes policies to protect the global financial system against threats such as money laundering and terrorist financing,

At the end of its Plenary Week in Orlando, Florida on June 22, 2019, the FATF announced that it had adopted and issued “an Interpretive Note to Recommendation 15 on New Technologies,” which clarifies the amendments to the international standards relating to crypto assets and describes how countries must comply with relevant recommendations.

The body advised countries to assess and mitigate the risks associated with virtual asset activities and service providers and implement sanctions and other enforcement measures when service providers fail to comply with their AML/CFT obligations.

They are also required to “license or register service providers and subject them to supervision or monitoring by competent national authorities,” and “will not be permitted to rely on a self-regulatory body for supervision or monitoring.”