Nigeria: CBN bars banks from virtual currency transactions

Jan 19, 2017

The Central Bank issued stern warning to banks to refrain from virtual currency transactions.

The Central Bank of Nigeria (CBN) in a circular signed by the Director, Financial Policy and ‎Regulation Department, Kelvin Amugo issued stern warning to commercial banks in Nigeria to refrain from virtual currency transactions. According to the circular issued last Tuesday, the CBN is making this move to safeguard the banking system from inherent money laundering and terrorism financing in the operations of virtual currencies. The circular states that "the emergence of Virtual Currencies (VCs) has attracted investments in payments infrastructure that provides new methods of transmitting value over the internet. "Transactions in VCs are largely untraceable and anonymous making them susceptible to abuse by criminals, especially in money laundering and financing of terrorism. VCs are traded in exchange platforms that are unregulated, all over the world. Consumers may, therefore, lose their money without any legal redress in the event these exchanges collapse or close business. "The development of VCs Payment Products and Services (VCPPS) and their interactions with other New Payment Products and Services (NPPS), give rise to the need for guidance to protect the integrity of the Nigerian financial system. There is, therefore, the need to address the Money Laundering/Terrorism Financing risks associated with VC exchanges and any other type of institutions that act as nodes, where convertible VC activities intersect with the regulated fiat currency financial system. "The attention of banks and other reporting financial institutions is hereby drawn to the above risks and you are required to take the following actions pending substantive regulation or decision by the CBN. Where banks or other financial institutions are not satisfied with the controls put in place by the virtual currency exchangers/customers, the relationship should be discontinued immediately; and any suspicious transactions by these customers should immediately be reported to the Nigerian Financial Intelligence Unit (NFIU)," the CBN said. The new directive from Nigeria's Central Bank implies that virtual currencies such as Bitcoin, Ripples, Monero, Litecoin, Dogecion, and Onecoin among others are not legal tenders in Nigeria.