It has been revealed that the Central Bank of Nigeria’s ban of cryptocurrency was an immediate reaction to the hijack of a commercial bank’s data and demand for a ransom payment in bitcoins by some cyber criminals. According to a source cited in Nigerian Tribune’s reporting, CBN was not against the use of cryptocurrencies and had not banned any individual from using it.
However, the regulator was only fulfilling its responsibilities of preventing unregulated actors from using the platforms of institutions it regulates to facilitate illegal transactions.
According to CBN governor’s words; “CBN, like many other major central banks around the globe, is cautious about the use of bitcoins in their respective economies because of the threats its usage posed to their financial systems.
“The concerns of the central banks prompted them to float the idea of issuing digital currencies, which would allow holders to make payments via the internet and offline, in a direct move to fend off threats of other existing means of electronic payment such as digital wallets, online banks or cryptocurrencies, which are risk-prone due to their speculative nature” the source noted.
Citing the proposed e-krona by the Riksbank of Sweden and advanced moves already made by the Peoples’ Bank of China to issue a digital currency as well as consultations by the European Central Bank and the Bank of England on the issue of digital currencies, the source said the concern of the CBN was valid and supported by all.
The source further explained that no central bank in the world would ignore threats to the financial system it regulates adding that investigations revealed that cryptocurrencies had been used by cyber criminals for laundering illicit funds, defrauding unsuspecting investors, scams and hijacking funds as was the case with the unnamed commercial bank in Nigeria.
The source then reiterated the need for Nigerians to be cautious in transacting in cryptocurrencies since they were highly volatile and not regulated by any central bank in the world nor insured by the government of any major economy. While noting that naira remained the only legal tender recognized in the Nigerian financial system by the CBN Act (2007), as amended.
He further stated that allowing cryptocurrency traders, who were unregulated, to continue to utilize the platforms of institutions regulated by the CBN would be tantamount to the Bank abdicating its regulatory role of ensuring monetary and price stability as well as promoting a sound financial system.
According to our reliable source, it was reported that the Federal Government, through the Central Bank of Nigeria (CBN) on Friday 5th February 2020 ordered banks to shut down all accounts of persons or entities involved in cryptocurrency transactions within their systems. This is according to a circular released to deposit money banks, non-bank financial institutions, and other financial institutions, warning that disobedience to the directive will attract severe sanctions.
In January 2017, CBN had said digital currencies such as bitcoin, litecoin, and others are largely used in terrorism financing and money laundering, considering the anonymity of virtual transactions. It had also said that such currencies are not accepted as legal tender in Nigeria.
In February 2018, the apex bank also issued a warning to people who invest in cryptocurrencies, saying they would be unable to seek legal redress in the event of collapse because they are not protected by the law. The ban of cryptocurrency has since triggered stormy reactions.
Social media influencers like Japheth Omojuwa stated that the Federal Government ban, “if stands, will literally kill Nigerian companies and also harm foreign investment”.
Omojuwa argued that “investors from mostly the United States have, in spite of the risks involved in investing in our country, invested in Nigerian fintech companies that this letter clearly targets”.
“This is not going to be a case of losing some money, this is a case of companies closing shop. Companies operating on investment from abroad and this will affect Nigerians trading legitimately and looking to make ends meet in the midst of an excruciating environment and economy”. With this decision by the CBN, Omojuwa lamented that “the CBN wants to kill businesses”.
Also reacting to the CBN directive, Professor Uche Uwaleke of Nasarawa state University said the decision may not be unconnected with the fact that “the CBN and the Securities and Exchange Commission are not yet ready with regulations guiding crypto asset trading platforms operations in Nigeria.”
He urged the public to see this directive by the CBN to banks in the light of the risk that unregulated crypto currency trading could pose to the financial system.