•Financial institutions saddled with tough monitoring, reporting responsibilities
Crypto exchanges otherwise known as virtual assets service providers (VASPs) are restricted from making cash withdrawals from their operational bank accounts among other stringent conditions, a new guideline issued by the Central Bank of Nigeria (CBN) has said.
An account opened for virtual asset service, the regulator added, would not be used for other purposes while “no third-party cheque shall be cleared” from such an account.
These and many other stringent conditions are contained in a guideline addressed to banks and other financial institutions as a reversal of an earlier circular in February 2021, which banned financial institutions from offering services to crypto-related businesses.
“However current trends globally have shown that there is a need to regulate the activities 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 its Recommendation 15 to require VASPs to be regulated to prevent misuse of virtual assets for ML/TF/PF.
“Furthermore, Section 30 of the Money Laundering (Prevention and Prohibition) Act, 2022 recognises 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,” CBN noted in a circular signed by the Director of Financial Policy and Regulation Department, Haruna Mustafa.
The apex bank had lifted the ban on offering financial service to cryptocurrencies close to two years after the decision was taken by the former CBN governor, Godwin Emefiele.
“Except for settlement of a virtual/digital assets transaction which shall be done through a transfer to another designated account, the withdrawal shall be only through a managers’ cheque or transfer to an account,” the new rule said.
Unlike the instant settlement enjoyed by other accounts, the settlement cycle for transactions of VASPs, the CBN noted, shall be T+3, meaning that transactions involving such accounts would take three working days before a value is received.
Financial institutions (FIs) offering services to the exchanges are saddled with extra due diligence responsibilities, including monitoring to prevent abuse and misuse of the accounts for money laundering and other related crimes.
“FIs shall monitor, on a continuous basis, all activities conducted in designated accounts opened in accordance with these guidelines. FIs shall, at the end of every month and not later than the 10th day of the following month, submit to the relevant supervisory department of CBN, data and other information on the designated accounts.
“The content of the returns shall include but not limited to: the number of designated accounts opened within the reporting period; the value and volume of transactions conducted in each account within the reporting period; the details of the counterparty (ies) to the transactions; incidents of fraud or theft and number of customer complaints and remedial measures taken,” said the rules.
