Nigerian fintech lawyer, Senator Ihenyen, has expressed support for the Central Bank of Nigeria’s (CBN) recent guidelines restricting cash withdrawals from accounts operated by virtual asset service providers (VASPs). Ihenyen sees the restriction as potentially aligned with the CBN’s efforts to combat the use of cash in funding criminal activities and to address the high cost associated with handling physical currency.
Nigerian lawyer notes the positives of the policy
Citing the impact of cash transactions on monetary policy and the potential for fraudulent activities in crypto-to-fiat cash withdrawals, Ihenyen suggests that the prohibition could be in line with the broader goals of the CBN. He emphasizes the need to consider the existing cashless policy, which imposes cash withdrawal limits, and recommends a cash handling fee for exceeding those limits. However, Ihenyen points out that an outright prohibition on cash withdrawals may conflict with the CBN’s cashless policy.
The lawyer suggests an alternative approach where VASPs are required to hold customer funds for transfers in a designated customer account, housed with any deposit money bank in Nigeria. This separation of customer accounts from other VASP-operated accounts would facilitate the management of cash withdrawal limits and align with the broader regulatory framework. Despite the recent circular from the CBN lifting the prohibition on financial institutions dealing with crypto entities, the central bank maintains restrictions on banks and financial institutions from holding, trading, or transacting in virtual currencies on their account.
Additionally, the prohibition on cash withdrawals from accounts operated by VASPs remains in effect. Ihenyen stresses the importance of ongoing stakeholder engagements involving regulators, innovators, and users as financial innovations continue to evolve. He believes that with collaborative efforts, regulations can adapt to meet the needs of consumers and contribute to the overall stability of Nigeria’s financial system. In assessing the situation, Ihenyen highlights the need for a balanced approach that considers both the regulatory objectives and the practical implications for businesses and consumers.
Proposal for regulatory harmony and financial stability
As the financial landscape transforms, he suggests that a nuanced regulatory framework, crafted through continuous dialogue, will be essential for fostering innovation while ensuring the integrity and safety of the financial system. While the CBN’s move to lift the prohibition on dealing with crypto entities reflects a willingness to align with international standards, the continued restrictions on virtual currencies and cash withdrawals from VASP-operated accounts indicate a cautious approach.
Ihenyen’s proposal for designated customer accounts could offer a compromise, allowing for effective regulation while accommodating the evolving nature of the fintech landscape. Ultimately, the evolving regulatory landscape in Nigeria’s fintech sector emphasizes the dynamic nature of the relationship between regulators, innovators, and users. As the industry continues to grow and adapt, ongoing collaboration and open dialogue will be crucial in shaping regulations that support innovation, protect consumers, and contribute to the stability of the financial system.
Senator Ihenyen’s perspective sheds light on the complexities of navigating the intersection between traditional financial regulations and emerging fintech trends. The ongoing discussions and potential adjustments to the CBN’s guidelines underscore the importance of a flexible and adaptive regulatory framework to foster a thriving and secure financial ecosystem in Nigeria.
