CRYPTOCURRENCIES:- NOTABLE REGULATIONS ON BANK ACCOUNT OPERATIONS FOR VIRTUAL ASSET SERVICE PROVIDERS (VASPS) IN NIGERIA.
Introduction:- The Central Bank Of Nigeria (CBN) , on the 22nd of December,2023, released a set of guidelines which effectively revoked its previous ban on banking services for Cryptocurrency/Digital Asset businesses (Virtual Asset Service Providers or “VASPs”) which took effect from February,2021.
What this means is that Virtual & Digital Asset businesses in Nigeria can now operate bank accounts for the purpose of supporting their direct business operations which still rely on Fiat currencies to an extent.
This article will be looking at the notable provisions of these regulations regarding bank account set-up and operation for VASPs & Digital Asset entities in Nigeria.
What is the scope of the CBN regulations?
-The regulations apply to Banks and Other Financial Institutions (OFIs) under the jurisdiction of the CBN in Nigeria.
Which persons or entities are classified as eligible stakeholders in the CBN Guidelines?
-Commercial & merchant banks.
-Payment Service Providers or “PSPs” (those involved in 3rd party settlements).
-License virtual & digital asset businesses including Digital Asset Exchanges (DAX), Digital Asset Offering Platforms (DAOPs), Virtual Asset Service Providers (VASPs) & any other entity that may be categorized by the CBN from time to time.
What are the permissible activities mentioned in the CBN guidelines concerning VASP bank account set-up and operation?
The permissible activities mentioned in the guidelines are :-
-The opening of designated accounts.
-The provision of designated settlement accounts and settlement services.
-Acting as channels for FX flows and trade.
-Any other activity that may be permitted by the CBN from time to time.
What are the relevant provisions contained in the guidelines regarding bank account operation by VASPs in Nigeria?
Designation of Accounts
-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 in line with CBN guidelines.
-Designated accounts shall only be opened with the approval of senior management of the financial institution.
VASP Bank Account Opening Requirements
-Evidence of a valid license issued by the Securities & Exchange Commission (SEC) for the entity to operate as a VASP/DAX/DAOP.
-A Certified True Copy (CTC) of the virtual/digital asset company’s Memorandum and Articles of Association (MEMART).
-Copies of the company’s statutory corporate information as recognized by the Corporate Affairs Commission (CAC) which should include its:-
a). Statement of share capital & return of allotment of shares.
b). Particulars of the company’s secretary.
c). Registered address of the virtual/ digital asset business.
d). Particulars of the virtual/digital asset company’s directors, principal officers and beneficial owners (BOs) as well as their valid means of identification ,Bank Verification Numbers (BVN) ,and home addresses.
-A copy of the VASP’s /Digital Asset company’s Anti-Money Laundering Combating The Financing Of Terrorism Combating The Proliferation Of Financing Of Weapons Of Mass Destruction (AML/CFT/CPF) policy to be prepared by a legal practitioner.
-Any other requirement that the CBN may impose from time to time.
Restrictions On The Use Of VASP Bank Accounts
-A designated account shall only be used for transactions on virtual digital assets & not for any other purpose.
-No cash withdrawals shall be allowed from the account.
-No 3rd party cheque shall be cleared from the account.
-Withdrawals shall only be through a manager’s cheque or transfer to an account except for the settlement of a virtual/digital assets transaction through transfer to another designated account.
What are some of the provisions of the CBN guidelines regarding designated settlement accounts for VASPs/ Digital Asset businesses in Nigeria?
-Financial Institutions (FIs) shall obtain authorization from the CBN for the opening & operation of designated settlement accounts for licensed VASPs and digital asset businesses.
-All obligations arising from transactions within the platforms of VASPs/Digital Asset businesses shall be settled into the designated settlement accounts maintained by them in the banks.
-The designated settlement accounts shall warehouse all Naira positions of individuals with the VASPs/Digital Asset businesses.
-The designated settlement account & any associated linked account for warehousing settlement monies, shall not be interest-bearing.
-The details of the transactions on the VASP/Digital Asset platform leading to settlement on the designated settlement account shall be accessible online, on a real-time basis to the FIs at all times.
-The settlement cycle for transactions of VASPs/DAs shall be T+3
What do the guidelines say on the issue of dormant accounts?
-The guidelines state that a VASP bank account is to be closed and a notice of closure being served to the account holder in the event of there being no customer-induced transaction on the account in 3(Three) months.
What are the provisions of the guidelines regarding consumer protection?
-The guidelines instruct Financial Institutions (FI) :-
a). To ensure that appropriate consumer protection systems against risks of fraud are established.
b). To provide a channel for communication of customer complaints against designated account holders.
c). To establish complaints redress mechanisms & ensure proper communication of these mechanisms to the general public.
Emmanuel Ifeanyi Ogbuka, Esq,a legal practitioner/consultant & practice manager of I.OGBUKA LEGAL, writes from Lagos, Nigeria.
Email :- info@ogbukalegal.com
*******PLEASE NOTE******* This article is strictly for informative purposes and neither constitutes legal advice nor a valid lawyer/client relationship.