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CBN Lift Restrictions on Banks from Facilitating Crypto Transaction But Set Regulatory Framework

Cryptocurrency Transactions have been allowed by CBN in Nigeria

In a landmark move, the Central Bank of Nigeria (CBN) has lifted its 2021 ban on banks facilitating cryptocurrency transactions. This decision signals a significant shift in the country’s stance on digital assets, potentially opening doors for wider crypto adoption and innovation.

The CBN’s announcement comes after months of speculation and dialogue with industry stakeholders. Concerns surrounding financial stability and anti-money laundering measures initially led to the ban. However, the apex bank has acknowledged the growing global acceptance of cryptocurrencies and the potential benefits they offer.

While lifting the ban, the CBN has simultaneously released guidelines for regulated financial institutions (RFIs) when dealing with entities providing crypto services. These guidelines outline know-your-customer (KYC) and anti-money laundering (AML) procedures, risk management frameworks, and capital adequacy requirements specific to crypto-related activities.

“This new approach strikes a balance between fostering innovation in the digital asset space and ensuring the safety and integrity of the Nigerian financial system,” stated a CBN spokesperson. “We believe that these guidelines will enable RFIs to participate in the crypto market responsibly and contribute to the healthy development of the sector.”

Industry experts and crypto enthusiasts have greeted the news with cautious optimism. Some see it as a step towards full regulation and legitimization of the crypto industry in Nigeria. Others remain concerned about the potential for regulatory hurdles and urge clarity on specific implementation details.

“The lifting of the ban is a positive development, but the real test will be in the execution of the guidelines,” said Afolabi Ademola, founder of a local crypto exchange. “We need transparency and clear communication from the CBN to ensure a smooth transition and build trust within the crypto community.”

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With the CBN’s move, Nigeria joins a growing number of countries around the world adopting proactive regulatory frameworks for cryptocurrencies. The success of this approach will depend on effective implementation, ongoing collaboration with industry players, and continued efforts to educate the public about the risks and opportunities associated with digital assets.

This decision by the CBN marks a significant turning point for Nigeria’s relationship with cryptocurrencies. As the regulatory landscape evolves, it will be fascinating to see how the crypto industry in the country adapts and thrives in this new era.

Limitations of Banks and Crypto Companies

According to the CBN’s new regulatory framework, here are what Nigerian banks are allowed to do with crypto companies. Under the new framework, banks can now:

  • Open bank accounts for licensed VASPs.
  • Provide designated settlement accounts to facilitate transactions.
  • Act as channels for foreign exchange (FX) flows and trade related to crypto activities.

However, these privileges come with certain conditions:

Licensing: VASPs wishing to use banks must be duly licensed by the Securities and Exchange Commission (SEC). The SEC has outlined specific requirements for VASP licensing, including:

  • Minimum Paid-up Capital: ₦500 million ($553,000) minimum paid-up capital.
  • Registration: Registration with the Corporate Affairs Commission (CAC).
  • Token Issuance: Submitting a white paper to the SEC for approval before launching any tokens in Nigeria.

Know Your Customer (KYC): Banks are required to conduct stringent KYC checks on all directors and owners of VASPs using their services. This includes obtaining Bank Verification Numbers (BVN) for all relevant individuals.

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