CBN Bars Crypto Bank Account Operators from Cash Withdrawal
In the wake of the Central Bank of Nigeria’s (CBN) decision to lift restrictions on banks facilitating accounts for cryptocurrencies, a recently issued directive has introduced a notable shift in the operational landscape. The guideline stipulates that accounts associated with virtual assets will no longer permit cash withdrawals, marking a pivotal change in the dynamics of financial transactions in the country. This move is outlined in the ‘Guidelines on Operations of Bank Accounts for Virtual Assets Service Providers,’ which seeks to provide a structured framework for the evolving digital financial landscape.
Under the new directive, the CBN has explicitly stated that no cash withdrawals will be allowed from accounts associated with virtual assets. Instead, withdrawals must occur through a transfer to another designated account or via a manager’s cheque. The exception to this rule is the settlement of virtual/digital assets transactions, which can be conducted through a transfer to another designated account. This shift in withdrawal mechanisms aims to streamline and regulate the flow of funds within the virtual assets sphere, aligning with the CBN’s goal of fostering a more controlled and transparent financial ecosystem.
Moreover, the guidelines mandate that financial institutions monitor activities in designated accounts continuously. Every month, these institutions are required to submit comprehensive reports detailing the number of accounts opened, the value and volume of transactions for each account, details of counterparties involved in transactions, incidents of fraud or theft, customer complaints, and the remedial measures taken. This meticulous reporting structure is designed to enhance transparency, accountability, and risk management within the digital financial space.
Transaction limits for individual designated accounts are another key aspect covered in the guidelines. Financial institutions are directed to set these limits by the maximum transaction charges stipulated in the bank’s guide to charges. This provision aims to ensure that financial transactions within the virtual assets sector are conducted responsibly and within predefined boundaries, mitigating potential risks associated with excessive transactions.
Expanding the scope of permissible activities for financial institutions, the guidelines allow them to engage in various operations concerning Virtual Assets Service Providers. These include opening designated accounts, providing settlement accounts and services, acting as channels for foreign exchange (FX) flows and trade, and any other activity that may be permitted by the CBN over time. This broadening of activities signifies a recognition by the CBN of the evolving nature of the financial sector and its readiness to accommodate innovative solutions.
To ensure compliance with these guidelines, the CBN emphasizes the need for strict adherence by financial institutions. Non-compliance could result in severe sanctions, including the prohibition from opening further designated accounts, monetary penalties not below N2,000,000 against the financial institution (FI), its board, senior management, and staff for any infractions, and the suspension of the operating license of a financial institution. These sanctions underscore the seriousness with which the CBN views adherence to these guidelines and its commitment to maintaining the integrity of the financial system.
Importantly, the guidelines also address the process of opening accounts for virtual asset providers. Financial institutions are instructed not to open or permit the operation of any account for conducting virtual/digital asset business unless the account is designated for that purpose and opened in line with the guidelines. The designated account must receive approval from senior management within the financial institution, highlighting the importance of top-level oversight in ensuring compliance with these regulations.
The document further outlines a range of requirements aimed at safeguarding the financial system and customers from uncertainties and fraud risks. These requirements encompass entities such as virtual asset service providers, digital asset custodians, digital asset offering platforms, digital asset exchanges, and operators within the virtual and digital assets sector licensed by the Securities and Exchange Commission (SEC). These entities are now permitted to establish and manage accounts with financial institutions across Nigeria, marking a significant step toward integrating digital financial services into the broader financial ecosystem.
In conclusion, the recent directive from the CBN represents a comprehensive effort to regulate and streamline financial transactions associated with virtual assets in Nigeria. The guidelines provide a framework for financial institutions to operate within the evolving digital financial landscape while ensuring transparency, accountability, and risk mitigation. The emphasis on compliance and the potential for stringent sanctions underscores the CBN’s commitment to maintaining the integrity of the financial system as it adapts to the challenges and opportunities presented by the digital economy.
