CBN has banned Dealing in Virtual Currencies The Central Bank of Nigeria, CBN had banned Nigerian banks from any transactions in virtual currencies a
CBN has banned Dealing in Virtual Currencies
The Central Bank of Nigeria, CBN had banned Nigerian banks from any transactions in virtual currencies also known as cryptocurrencies.
This is coming after the Chinese government began investigating bitcoin transactions. Earlier in October 2016, the same Chinese government had a hosted a blockchain conference focused on taking a new look at blockchain technology’s promises.
Mr Kelvin Amugo, Director, Financial Policy and Regulation department, CBN said the ban was obliged by money laundering and terrorism financing risks inherent with the use of virtual currencies or cryptocurrencies.
In a CBN circular to banks and other financial institutions on virtual currency or cryptocurrency operations in Nigeria, Amogu stated: “The emergence of Virtual Currencies (VCs) has attracted investments in payments infrastructure that provides new methods of transmitting value over the internet.
Platforms of Financial Exchange
“Transactions in virtual currencies are largely untraceable and anonymous making them susceptible to abuse by criminals, especially in money laundering and financing of terrorism. Virtual currencies 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 Virtual Currency 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 virtual currency exchanges and any other type of institutions that act as nodes, where convertible Virtual currency 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;
- Ensure that you do not use, hold, and /or transact in any way in virtual currencies;
- Ensure that existing customers, that are virtual currency exchangers, have effective AML/CFT controls that enable them to comply with customer identification, verification and transaction monitoring requirements;
“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 apex bank restated that virtual currencies like Bitcoin and others virtual currencies listed here are not legal tender in Nigeria, thus any bank or institution that transacts in such business does so at its own risk.”
The CBN ban is coming a week after the Securities and Exchange Commission (SEC) warned against cyptocurrencies.
The Commission had said in a statement last week, “the public is hereby advised to exercise extreme caution with regard to digital (crypto currencies) as a vehicle of investments.
Given that these instruments and the persons, companies or entities that promote them have neither been authorized, nor any guidelines/regulations developed for them by any of the regulatory authorities in Nigeria, there is no protection available to users or investors in these virtual currencies from financial losses if the virtual currencies fail or the companies promoting them go out of business.