In a decisive move addressing the evolving landscape of digital currencies, the Central Bank of Nigeria (CBN) has issued a set of guidelines outlining the operational framework for banks and financial institutions engaging with virtual assets service providers (VASPs). The primary objective is to establish a regulatory foundation to mitigate the inherent risks associated with cryptocurrency transactions while fostering responsible financial practices.
Key Regulatory Directives:
1. Applicability:
– The guidelines are applicable to banks and financial institutions under CBN regulatory oversight.
2. Eligible Stakeholders:
– Commercial and merchant banks, payment service providers, and entities registered by the Securities and Exchange Commission (SEC) for digital/virtual asset services fall under the regulatory purview.
3. Permissible Activities:
– Banks are authorized to open designated accounts for cryptocurrency transactions, provide settlement services, facilitate foreign exchange transactions, and engage in other activities permissible by the CBN.
4. Operational Protocols for Cryptocurrency Accounts:
– Senior management approval is mandatory for opening designated accounts.
– Stringent documentation requirements, including SEC licenses and corporate documentation, are prerequisites for account opening.
– Designated accounts are strictly for cryptocurrency transactions, with no allowance for cash withdrawals or clearance of third-party cheques.
– Monthly reporting obligations on transactional activities to the CBN are mandatory.
5. Risk Management for AML, CFT, and CPF:
– Financial institutions (FIs) must establish robust risk management systems to detect and prevent money laundering, terrorism financing, and proliferation financing.
– Customer due diligence (CDD) procedures are to be implemented with enhanced due diligence (EDD) for designated accounts.
6. Consumer Protection Measures:
– FIs must institute consumer protection systems against fraud risks.
– Complaint channels and redress mechanisms for customer grievances related to designated accounts are to be established.
7. Sanctions for Non-Compliance:
– CBN reserves the right to impose sanctions, including the prohibition from opening designated accounts, monetary penalties, and suspension of operating licenses for non-compliance with the guidelines.
8. Amendment Authority:
– The CBN retains the authority to amend the guidelines as deemed necessary.
Implications for Stakeholders:
The guidelines signify a concerted effort by the CBN to provide a structured and secure environment for cryptocurrency operations. Stakeholders, including financial institutions and virtual asset service providers, are urged to adhere strictly to these guidelines to ensure regulatory compliance and mitigate associated risks.