THISDAY

Debate over Cryptocurr­ency Rages on

Obinna Chima writes on the on-going debate over recent decision by the regulators to prohibit transactio­ns on cryptocurr­ency in Nigeria’s Ànancial system

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For close to one month after the Central Bank of Nigeria (CBN) prohibited the use of cryptocurr­ency in the country’s banking and financial systems, the dust generated by the policy is yet to settle.

While the CBN and other proponents of the policy have continued to highlight risks in transactin­g in cryptocurr­encies as well as its potential dangers on the economy, those who oppose the apex bank’s policy believe a better means of managing the digital currency ought to have been adopted.

For instance, the CBN Governor, Mr. Godwin Emefiele, said the banking regulatory authority acted in the nation’s best interest by ordering banks, non-banking and other financial institutio­ns not to facilitate trading and dealings in cryptocurr­encies.

Emefiele, during a recent Senate briefing, described the operations of cryptocurr­encies as dangerous and opaque.

In the same vein, the Independen­t Corrupt Practices and Other Related Offences Commission (ICPC) and the Nigerian Financial Intelligen­t Unit (NFIU), which also addressed the joint committee, said cryptocurr­ency was being used as a channel for funding violence and terrorism in Nigeria.

Emefiele said the use of cryptocurr­ency contravene­d the law, adding that the fact that cryptocurr­encies are issued by unregulate­d and unlicensed entities, made it contrary to the mandate of the CBN, as enshrined in the CBN Act (2007) that empowers it as the issuer of legal tender in Nigeria.

Emefiele, who also differenti­ated between digital currencies, which apex banks can issue, and cryptocurr­encies issued by unknown and unregulate­d entities, stated that the anonymity, obscurity, and concealmen­t of cryptocurr­encies made them suitable for those who indulge in illegal activities such as money laundering, terrorism financing, purchase of small arms and light weapons and tax evasion.

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

“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 cryptocurr­ency transactio­ns should not be carried out through the Nigerian banking system,” he said.

Emefiele faulted arguments that the CBN’s actions were inimical to the developmen­t of FinTech or a technology-driven payment system.

On the contrary, he noted that the Nigerian payment system, boosted by reforms driven by the CBN has evolved over the past decade, surpassing those of many of its counterpar­ts in emerging frontier and advanced economies.

In his presentati­on, the Director-General of the Securities and Exchange Commission (SEC), Mr. Lamido Yuguda, said there was no policy contradict­ion between the CBN directive and the pronouncem­ents by the SEC on cryptocurr­encies dealings in Nigeria.

He said 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.

Prior to the CBN directive, he said the SEC, in 2017, had cautioned the public on the risks involved in investing in digital and cryptocurr­ency.

He added that the CBN, Nigeria Deposit Insurance Corporatio­n (NDIC) and the SEC between 2018 and 2020 had also warned on the lack of protection in investment­s in cryptocurr­ency.

Yuguda said following the CBN directive, the SEC had suspended the admittance of all persons affected by CBN circular into its proposed regulatory incubatory framework in order to ensure that only operators in full compliance with extant laws and regulation­s were admitted into the framework for regulating digital assets.

Similarly, the Chairman of the Independen­t Corrupt Practices and Other Related Offences Commission (ICPC), Prof. Bolaji Owasanoye highlighte­d the risks inherent in investing in virtual assets and cryptocurr­encies in Nigeria.

He explained that cryptocurr­encies posed serious legal and law enforcemen­t risks for Nigeria due to its opaque nature and illicit financial flows.

But despite these concerns, Vice President, Prof. Yemi Osinbajo, at the weekend, argued that the regulators ought to have considered regulating the digital currency instead of prohibitin­g it. He, however, said the federal government would not allow anyone to commit crimes in the country through the use of cryptocurr­ency.

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