Modupe Gbadeyanka
By Modupe Gbadeyanka
Financial institutions operating in Nigeria have been warned and directed not to “use, hold, trade and/ or transact in anyway in virtual currencies.”
This order was given by the Central Bank of Nigeria (CBN) in a circular titled ‘Circular to Banks and Other Financial Institutions on Virtual Currency Operations in Nigeria’ and signed by the Director, Financial Policy and Regulation Department, Mr Kevin Amugo.
In the circular, the apex bank admitted that the emergence of Virtual Currencies (VCs) has attracted investments in payments infrastructure that provides new methods for transmitting value over the internet, but emphasised that “transactions in VCs are largely untraceable and anonymous making them susceptible to abuse by criminals, especially in money laundering and financing of terrorism.”
The CBN noted that VCs are traded in unregulated exchange platforms all over the world and pointed out that because of this, “consumers may therefore lose their money without any legal redress in the event these exchangers collapse or close business.”
It said 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.
According to the CBN, there is therefore the need to address the Money Laundering/ Terrorism Financing (ML/TF) risks associated with VC exchanges and any other types of institutions that act as nodes, where convertible VC activities intersect with the regulated fiat currency financial system.
The apex drew the attention of banks and other financial institutions to the above risks and stressed that pending substantive regulation or decision by it (CBN), they (financial institutions) are required to “ensure that you do not use, hold, trade and lor transact in anyway 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 CBN reiterates that VCs such as Bitcoin, Ripples, Monero, Litecoin, Dogecion, Onecoin, etc, and similar products are not legal tenders in Nigeria, thus any bank or institution that transacts in such businesses does so at its own risk,” the circular concluded.
