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The Central Bank of Nigeria has directed Nigerian banks to refrain from trading with virtual currencies (VCs) such as bitcoins due to the money laundering risks associated with such transactions. In a circular released on Tuesday, the apex bank said transactions in VCs are largely untraceable and anonymous, making them susceptible to abuse by criminals, especially in money laundering and financing of terrorism.

“VCs 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 apex bank 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.”

The CBN said its directive aims to address these money laundering/financial terrorism risks associated with VC exchanges, which could act as nodes where such activities intersect with the regulated fiat currency financial system.

The apex bank, therefore, directed banks to ensure that they do not use, hold, and transact in virtual currencies. Furthermore, the regulator warned the banks to ensure that existing customers that are virtual currency exchangers have effective controls 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 said.

The apex bank further warned 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 business does so at its own risk.