CBN says cryptocurrency ban in interest of Nigerians

By Zainab Iwayemi

Following the central bank’s directive to prohibit deposit money banks, non-banking institutions and other financial institutions from facilitating trading and dealings in cryptocurrency, Godwin Emefiele, the Governor, Central Bank of Nigeria (CBN) has said the decision is in the best interest of Nigerian depositors and the country’s financial system.

The CBN governor made the statement during a joint senate committee briefing on Banking, Insurance and Other Financial Institutions; ICT and Cybercrime; and Capital Market, on its directive to institutions under its regulation.

While stressing that cryptocurrencies were issued by unregulated and unlicensed entities, the CBN noted that it is contrary to the mandate of the bank, as enshrined in the CBN Act (2007), which declares the bank as the issuer of legal tender in Nigeria. Thus, he described the operations of cryptocurrencies as dangerous and opaque.

He further stressed the differences between digital currency, which central banks can issue, and cryptocurrencies, issued by unknown and unregulated entities. He said the anonymity, obscurity and concealment of cryptocurrencies made it suitable for those who indulge in illegal activities ranging from money laundering to terrorism financing, purchase of small arms and light weapons as well as tax evasion.

Restating that the legitimacy of money and the safety of Nigeria’s financial system were central to the mandate of the CBN, he cited instances of investigated criminal activities that had been linked to cryptocurrencies

“Cryptocurrency is not legitimate money because it is not created or backed by any Central Bank. Cryptocurrency has no place in our monetary system at this time and crypto currency transactions should not be carried out through the Nigerian banking system,” he said.

While noting that the Nigerian payment system had evolved significantly over the past decade, surpassing those of many of its counterparts in emerging, frontier and advanced economies boosted by reforms driven by the CBN, he emphasized that the bank’s actions were not in any way, shape, or form inimical to the development of FinTech or a technology-driven payment system.

Emefiele assured that the CBN would continue its surveillance and deeper understanding of the digital space, stressing that the ultimate goal of the apex bank was to do all within its regulatory powers to educate Nigerians on emerging financial risks and protect our financial system from the activities of currency speculators, money launderers, and international fraudsters.

Explaining further, Lamido Yuguda, director-general of the Securities and Exchange Commission (SEC) noted that there was no policy contradiction between the CBN directive and the pronouncements made by the SEC on the subject of cryptocurrencies in Nigeria. He explained that the SEC made its pronouncement at the time to provide regulatory certainty within the digital asset space due to the growing volume of reported flaws.

Yuguda further disclosed that in accordance with the CBN directive, the SEC had put on hold the admittance of all persons affected by CBN circular into its proposed regulatory incubatory framework in order to ensure that only operators that are in full compliance with extant laws and regulations are admitted into the framework for regulating digital assets.

Bolaji Owasanoye, chairman of the Independent Corrupt Practices and Other Related Offences Commission (ICPC), highlighted the risks associated with investing in virtual assets and cryptocurrencies in Nigeria.

“Cryptocurrencies posed serious legal and law enforcement risks for Nigeria due to its opaque nature and illicit financial flows,” adding that, “the current move by the Federal Government to link National Identification Numbers with SIM cards attested to the fact that terrorists, kidnappers, bandits, and perpetrators in illegal acts had relied on the shield provided by anonymity to commit heinous crimes,” he explained.