CBN lifts ban on crypto transactions in Nigeria after two years with strict guidelines

The Central Bank of Nigeria (CBN) has removed a two-year restriction on cryptocurrency transactions as it introduces stringent customer KYC and anti-money laundering checks.

This was contained in a circular issued by the CBN Director, Financial Policy and Regulation department, Haruna Mustafa on Friday, December 22, 2023.

The apex bank said it has issued a guideline to provide guidance to financial institutions under its regulatory purview in respect of their banking relationship with Virtual Assets Service Providers (VASPs) in Nigeria.

Recall that the CBN in February 2021 had 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.

However, in the latest circular issued to all banks and other financial institutions on Friday, the CBN said: “current trends globally have shown that there is need to regulate the activites of virtual assets service providers (VASPs) which include cryptocurrencies and crypto assets.

“Following this development, the Financial Action Task Force (FATF) in 2018 also updated tts Recommendation 15 to require VASPs to be regulated to prevent misuse of virtual assets for MLU/TF/PF. Furthermore, Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022 recognizes VASPs as part of the definition of a financial institution.

In addition, the Securities and Exchange Commission (SEC) in May 2022 issued Rules on Issuance, Offering and Custody of Digital Assets and VASPs to provide a regulatory framework for their operations in Nigeria.”

Meanwhile, the unification of the country’s exchange rate significantly increased revenue from foreign exchange difference to N1.36tn in six months.

This is according to the data obtained from communiques of the Federation Account Allocation Committee.

The extra-ordinary profits is against the backdrop of foreign exchange revaluation gains arising from depreciation of the naira which currently sells at N825/$, compared to its 2022 closing rate of N461.50/$1.

According to the communique, the difference increased from N0.639bn in June to N364.87bn in November.

Also, the government shared N320.89bn in July, N229.67bn in August, N186.81bn in September and N262.89 in the month of October.

Providing a breakdown on how the accrued revenue was shared among the three tiers of government, an analysis of the document revealed that after the federation account gained N625.77bn from exchange difference revenue, state governments shared N317.36bn, while the local government got N244.66bn in six months.

Before an amount is shared between the three tiers of government, there are usually statutory deductions, such as 13 per cent derivation and other charges and costs.

After the deductions, the Federal Government gets 52.68 per cent, State Governments gets 26.72 per cent, and Local Governments gets 20.60 per cent based on the current vertical allocation formula on the net federation account revenue distributable.

However, out of the 52.68 percent of the Federal Government’s share, general ecological problems get one percent, Federal Capital Territory gets one percent, development of natural resources gets 1.68 percent, and statutory stabilisation gets 0.5 percent. The balance of 48.5 percent is for the Federal Government.

Recently, it was reported that no fewer than 13 state governments recorded significant foreign exchange revaluation profits worth N71.59bn in three months.

This was disclosed through data obtained from the third quarter budget implementation report (July to September) on each state’s website.

Among the 13 States, Akwa- Ibom had the highest earning at (N10.2bn), followed by Jigawa (N7.23bn), Imo (N6.26bn).

It was followed by Kogi (N5.92bn), Nasarrawa (N5.75bn), Plateau (N5.65bn), Abia (N5 34bn), Adamawa (5.34bn) Enugu (N5.1bn) and Zamfara (N5.02bn).

It was also observed that Bauchi got the lowest profit of N120m, while Ebonyi received N4.79bn, Osun got N4.89bn

✍️ Temitope Hassan