Redefining Digital Asets in Nigeria
Recently, the institutions, cryptocurrency the the Ànancial apex and bank market shut eͿectively down was rattled all shut its to exchanges. the its core, door when against Prohibiting the access Central its to use the Bank in digital banks of Nigeria currency and other (CBN) in Ànancial Nigeria. banned However, coming at a point when so much pressure is on the country currently, in terms of insecurity and citizens cry against bad governance, some conspiracy theorists believe the decision may have some political undertone. But then, the anonymity value of the digital asset, may actually be the Achilles heel of the cryptocurrency, because that is a major minus the CBN holds on to in defence of its decision. Following interventions by the National Assembly and other voices of reason, discussions and consultations are ongoing to Ànd ways to stir a middle course on the matter. Like a cherry on the cake of support for the blockchain business, Vice President Yemi Osinbajo’s statement two days ago Ànally made the point for a guided cryptocurrency regulation in the country rather than an outright ban. &KULV 3DXO reports
On of 5th Nigeria February, (CBN) 2021, sent the a memo Central to banks Bank them and other of the Ànancial prohibition institutions of any dealing to notify in cryptocurrencies and payment facilitation for cryptocurrency exchanges. The CBN further instructed all banks and other Ànancial institutions to identify individuals or entities, who transact in cryptocurrency or operate cryptocurrency exchanges and close the accounts of such persons or entities.
Predictably, the letter caused a major stir amongst experts and in the court of public opinion with many concerned about the negative impact it could have on Nigeria’s growing cryptocurrency market and innovation in the Àntech industry.
Responding to these concerns, the CBN it seemed, was able to put its thoughts together to modify its earlier memo to the banks, giving reasons, explaining the rationale, for its decision. It issued a press release, two days later, on 7th February 2021, explaining its earlier directive and providing reasons for its prohibition of cryptocurrency transactions by banks and other Ànancial institutions.
The CBN’s decision on cryptocurrency had also attracted attention from the highest levels of government.
During its deliberation on the CBN’s directive on February 11, the Nigerian Senate resolved to invite the CBN Governor to brief them on the actions of the apex bank.
The meeting was further necessitated by some senators, who expressed reservations about the ban on cryptocurrency transactions.
One other excuse the apex bank advanced as reasons for shutting down cryptocurrency exchanges, is the unregulated nature of and unlicensed entities running the digital currency sector.
For the bank, the use of cryptocurrencies in Nigeria contravenes existing laws as they are not legal tender.
It also identiÀed the anonymity of cryptocurrency as an issue; stating that anonymity and the lack of .now Your Customer (.YC) made it vulnerable to illegal use such as money laundering and the Ànancing of terrorism. Another justiÀcation for slamming the hammer on the virtual Ànancial subsector, was the volatility of cryptocurrencies, which it maintains, threatens the stability of Ànancial systems in other countries.
With over 500 million worth of Bitcoin traded over the last Àve years, Nigeria has the second largest Bitcoin market in the world. So, a total shut down may not be in the interest of a weak economy as Nigeria’s.
This consideration might be what informed the cautious approach adopted by the capital markets regulatory.
On September 1 , 2020, the Securities Exchange Commission (SEC) issued a statement announcing its intention to regulate “digital assets” which includes cryptocurrencies. In the light of CBN’s directive, SEC faced calls to clarify whether there was a contradiction in the policies of the two regulators.
But in what industry analysts regard as a face-saving policy moderation, ¶double-speak,’ to cover CBN’s perceived Áawed reactionary policy, SEC subsequently issued a statement on February 11, 2021, stating that it would partner the CBN to analyse and better understand the identiÀed risks of cryptocurrency to ensure that appropriate regulations are put in place if cryptocurrency transactions are to be allowed in future.
So, CBN’s directive on cryptocurrency transactions understandably has an eͿect on the cryptocurrency market in Nigeria, because it means those trading in the digital asset will be essentially prevented from buying cryptocurrencies with their credit debit cards issued by Nigerian banks or receiving proceeds of cryptocurrency sales from exchanges which facilitate the buying and selling of cryptocurrency.
In compliance to the CBN’s directive, banks begun to identify and deactivate the account of individuals with inÁows outÁows from to cryptocurrency exchanges. It is unclear if aͿected individuals would be able to reopen accounts with these banks in future. Fortunately, for the crypto community, however, some of their members have come up with ideas that have outsmarted the new, but hostile system; as some exchanges may have found a way around the restriction; by switching to peer-to-peer trading; which enables individuals to buy or sell crypto currency, from individual to In operate other words, settlement traders this as opposed accounts does away to in the with Nigerian exchanges. the need banks. for exchanges
This anti-CBN Àx is a graphic demonstration of the very essence and spirit of the cryptocurrency initiative which was berthed during the global economic meltdown of 2008.
The idea of the digital asset is to decentralize central banking system. The state of aͿairs in the global Ànancial market today, is that 60 per cent of central banks are under pressure to create digital money. value investors This and development for acceptability alternative is of consequent places cryptocurrencies to put upon their the money. and sudden the search rise by in At the February edition of the Finance Correspondents Association of Nigeria, (FICAN), monthly forum in Lagos, held on Tuesday, 2 February 2021, an Economist and Chief Executive Ocer, Global Analytics Derivatives Ltd, Mr. Tope Fasua, said, though no banker to the government will support cryptocurrency;
“They have no option than to begin to issue their own Central