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The Central Bank of Nigeria (CBN) has granted the Africa Stablecoin Consortium (ASC) approval to introduce Compliant Nigerian naira stableCoin (cNGN) within its regulatory sandbox.
This marks a pivotal moment in the Nigerian financial landscape, as the ASC, comprising leading financial institutions, fintech innovators, and blockchain experts in the country, focuses on monetary transactions.
Scheduled to go live on February 27, 2024, the cNGN is backed 1:1 by naira reserves in designated commercial banks and expected to propel the naira beyond borders, offering swift, cost-effective transactions on a global scale, the ASC mentioned in its official statement.
Meanwhile, the apex bank has released new guidelines to regulate the operations of bank accounts for Virtual Assets Service Providers (VASPs), otherwise known as cryptocurrency.
The new rules, published on CBN’s website, flesh out the regulator’s decision last month to lift its prohibition on banks operating accounts for crypto service providers.
The framework provides minimum standards and requirements for banking business relationships and account opening for VASPs, and creates an effective monitoring of the activities of banks and Other Financial Institutions (OFIs) in providing service for Securities and Exchange Commission (SEC) licensed VASPs/Digital Assets (DA) entities in the country.
Among other things, the document also sought to ensure effective risk management in the banking industry with regard to the operations of licensed VASPs.
The new guidelines followed the lifting of the ban that previously barred banks from operating accounts for crypto assets, although banks are still not allowed to hold or trade in crypto assets themselves.
“Current trends globally have shown that there is need to regulate the activities of virtual assets service providers which include cryptocurrencies and cryptoassets,” it said.
CBN Director, Financial Policy and Regulation Department, Mr. Haruna Mustafa, in a circular addressed to banks and other financial institutions, stated that banks are “still prohibited from holding, trading and/or transacting in virtual currencies on their own account.”
The apex bank said from the commencement of the regulations, 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 opened in line with the requirement of the guidelines.
Under the new framework, commercial and merchant banks; Payment Service Providers (restricted to those that are involved in settlement for third parties); all entities registered by SEC to conduct the business of digital/virtual assets services provision were eligible to register bank accounts for the operation of virtual assets.
In addition to the permissible activities of each category of institution, financial institutions were permitted to undertake opening of designated accounts, provide designated settlement accounts and settlement services, as well as act as channels for FX flows and trade in their operations of accounts for VASPs.
The central bank mandated financial institutions to establish transaction limits for each designated account opened in accordance with the guidelines in line with its risk assessment criteria.
It stated that limits shall be prudent and bear a relationship to the volume of cash moved by the account holder and the risks associated with the conduct and nature of the business of the account holder.
The apex bank also stated that designated accounts shall not be run on concession, as banks shall not allow or enter into any concession agreement/arrangement with a holder of a designated account.
It stressed that such accounts shall at all times be subject to the maximum transaction charges band as provided for under the CBN Guide to Charges for Banks and Other Financial institutions.
Among other restrictions imposed on the VASPs’ bank account, the central bank instructed that no cash withdrawal shall be allowed from the account, adding that no third-party cheque shall be cleared from the account as well.
The CBN further stated that an account opened in accordance with the guidelines shall only be used for transactions on virtual/digital assets and not for any other purpose.
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