Megha Agrawal
The Central Bank of Nigeria has clarified that accounts opened for virtual and digital asset transactions won’t permit cash withdrawals.
The apex bank further explained that withdrawals from these accounts will exclusively occur through transfers or manager’s cheques.
These accounts, as per the bank’s new guidelines, are solely designated for virtual/digital asset transactions and not for any other purpose.
The guideline specifies, “Cash withdrawals are prohibited from the account, and third-party cheques won’t be accepted. The only allowed withdrawal method for virtual/digital asset transactions is through a transfer to another designated account or via a manager’s cheque.”
In a December circular titled ‘Guidelines for the Operation of Bank Accounts for Virtual Asset Service Providers,’ bearing reference number FPR/DIR/PUB/CIR/002/003 and signed by Director Haruna Mustafa of the Financial Policy and Regulation Department, the banking regulator introduced a change in its stance on crypto assets. The regulator directed banks to facilitate crypto transactions.
Under its new policy direction, the bank expressed a more favorable attitude towards regulation, departing from its previous stance of restricting crypto assets from the formal banking sector.
The accompanying guideline, issued alongside the circular, serves as the framework for reintegrating crypto into the formal banking sector.
The CBN commented on the guideline, stating, “These Guidelines are applicable to banks and other financial institutions under the regulatory oversight of the CBN.”
One of the objectives states, “To establish minimum standards and prerequisites for banking business relationships and account opening for Virtual Assets Service Providers in Nigeria.”
As per the guidelines, financial institutions are now authorized to engage in various activities concerning Virtual Assets Service Providers’ accounts. These activities include opening designated accounts, offering designated settlement accounts and services, serving as conduits for FX flows and trade, and any other activities that the CBN may approve from time to time.
Regarding the procedure for virtual asset providers to open accounts, the central bank commented, “Starting with the implementation of these Regulations, financial institutions are prohibited from initiating or permitting the operation of any account for individuals or entities engaged in virtual/digital asset businesses unless the account is specifically designated for this purpose and is opened in accordance with the Guidelines.”
“The designated account can only be established with the endorsement of the financial institution’s senior management.”
The new CBN guideline additionally outlines a comprehensive set of other prerequisites intended to safeguard the financial system and customers from uncertainties and fraudulent activities.
Stressing the importance of financial institutions’ compliance with its directives, the central bank emphasized that banks failing to do so could face suspension of their licenses.
The document, in certain sections, stated, “In addition to the use of remedial measures as outlined in these Guidelines, the CBN, notwithstanding its powers under the BOFIA 2020, reserves the right to impose any or all of the following sanctions upon a financial institution, its board of directors, officers, or staff for non-compliance with these Guidelines:
Restriction on the establishment of additional designated accounts; Imposition of a monetary fine not less than 2,000,00O.00 on financial institutions (FIs), their board members, senior management, and employees for any violations. Temporary suspension of the operating license for an FI.
Senator Ihenyen, the Lead Partner and Head of Blockchain and Virtual Assets Practice at Infusion Lawyers, informed The PUNCH when the CBN unveiled its crypto policy shift, “Fortunately, our regulators will collaborate to guarantee consumer protection and investor safety.”
He emphasized that Nigeria, as the leader in crypto adoption in Africa and a prominent global market, can’t afford to continue relegating digital assets into the shadows, citing clear economic and security reasons.
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