Nigeria’s CBN bars crypto bank account operators from cash withdrawal

The Central Bank of Nigeria has announced that cash withdrawals from accounts formed for transactions involving virtual and digital assets will not be permitted.

The apex bank clarified that withdrawals from these accounts could only be made by transfer or manager’s check. A recent set of “Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers” made this information clear.

The bank states that an account formed in accordance with its new policies may only be used for transactions involving virtual or digital assets.

A portion of the guidelines said, “Cash withdrawals from the account are not permitted.” No check from a third party may be removed from the account. With the exception of virtual or digital asset transactions, which must be settled by transfer to a different designated account, withdrawals can only be made by managers’ check or account transfer.

The banking regulator announced a change in policy regarding crypto assets and instructed banks to start facilitating crypto transactions in a December circular titled “Circular to all banks and other Financial Institutions guidelines on operations of bank accounts for Virtual Assets Service Providers,” which was signed by Haruna Mustafa, Director, Financial Policy and Regulation Department, and had reference number FPR/DIR/PUB/CIR/002/003.

In its new policy direction, the bank stated that it was more open to the idea of regulation rather than its earlier position of the restriction of crypto assets from the formal banking sector.

The guideline, published alongside the circular, is meant to serve as the framework for the reintroduction of crypto into the formal banking sector.

Commenting on the guideline, the CBN said, “The Guidelines shall apply to banks and other financial institutions under the regulatory purview of the CBN.”

Part of the objectives read, “Provide minimum standards and requirements for banking business relationships and account opening for Virtual Assets Service Providers in Nigeria.”

Based on the guidelines, financial institutions are now allowed to undertake the following activities in their operations of accounts for Virtual Assets Service Providers including, opening designated accounts, the provision designated settlement accounts and settlement services, acting as channels for FX flows and trade, and any other activity that may be permitted by the CBN from time to time.

Commenting on how virtual asset providers can open accounts, the apex bank noted, “From the commencement of these Regulations, financial institutions 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 designated account shall only be opened with the approval of senior management of the FI.”

The new CBN guideline further provides an extensive list of other requirements aimed at protecting the financial system and customers from uncertainty and fraud risks.

Hammering on the need for financial institutions to adhere to its guidelines, the apex bank highlighted that erring banks could get their licence suspended.

The document read in parts, “Notwithstanding the powers of the CBN under the BOFIA 2020 and in addition to the use of remedial measures in these Guidelines, the CBN may take any or all of the following sanctions against a Fl, its board of directors, officers or staff for failure to comply with any of the requirements of these Guidelines:

“Prohibition from opening any further designated account; Monetary penalty not below the sum of 2,000,00O.00 against the FIs, members of its board, senior management, and any staff, for any infraction. Suspension of the operating licence of a Fl.”

When the CBN announced its policy shift on crypto, the Lead Partner and Head of Blockchain and Virtual Assets Practice at Infusion Lawyers, Senator Ihenyen, told DDM News, “Thankfully, our regulators will now work together to ensure consumer protection and investor safety.

“Nigeria can no longer afford to keep pushing digital assets underground, for obvious economic and security reasons, especially when you are number on in crypto adoption in Africa and a leading market in the globe.”

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