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
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.