Economy Today

The Ban On Cryptocurrencies By The CBN: Where Do We Go From Here?

Economy Today

It is no longer news that the Central Bank of Nigeria (CBN) had written the letter dated 5 February 2021 directing that all banks, non-bank financial institutions and other financial institutions should identify persons and/or entities transacting in or operating Cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately.

This led to the disclosure in a statement issued by The Securities and Exchange Commission (SEC) which states that it would put on hold the admittance into its Regulatory Incubation Framework for Fintech firms all persons affected by the Central Bank of Nigeria (CBN) Cryptocurrency Circular until such persons would be able to operate bank accounts within the Nigerian banking system.

The implication is that until CBN reversed the directive the ban remains.

There is no bank in Nigeria that would violate this directive. They had complied as expected and issued mandatory closure of account advice to their customers.

The SEC statement threw up the issue of the regulatory body to regulate Crypto currency in Nigeria since it falls within the digital asset space.

There is nothing yet to suggest that the ban is foreclosed in view of Senate summons of CBN Governor and SEC DG and SEC admittance that it ‘engaged with the CBN and agreed to work together to further analyse, and better understand the identified risks to ensure that appropriate and adequate mitigants are put in place, should such securities be allowed in the future’.

The SEC promised to “monitor developments in the digital asset space and further engage all critical stakeholders with a view to creating a regulatory structure that enhances economic development while promoting a safe, innovative and transparent capital market”.

Central Bank of Nigeria (CBN) decided to ban cryptocurrency trading in the country having been warned by the United States’ Federal Bureau of Investigation, (FBI), on the activities of fraudsters using cryptocurrencies to bring into the country hundreds of millions of US Dollars illegally obtained from the USA and other Western economies.

President of the European Central Bank, Christine Lagarde lent credence to the FBI’S warning stating of bitcoin as “a highly speculative asset that has led to some reprehensible activity, including money laundering, and any loopholes need to be closed”.

She further stated, “There has to be regulation. This has to be applied and agreed upon at a global level because if there is an escape that escapes will be used”.

It becomes more worrisome to learn that Nigeria had become the second country in the world with the biggest cryptocurrency transactions with fraudsters remitting between $200 and $300 million to Nigeria every week, using cryptocurrencies without the underlining economic base to justify the massive flow of such funds on a weekly basis.

It is believed that these funds may be used to destabilise the Nigerian economy.

It is also more disturbing that intelligence reports indicated that kidnappers had switched to bitcoin for ransom payments, making it increasingly difficult to trace.

ABCON backs ban to prop anti-money laundering stance.

Some Analyst argued that the ban would likely trigger enhanced activities in the nation’s stock market.

CBN ban had attracted sharp reactions from some Nigerians and had become a topical subject of national discussion.

President, Stakeholders in Blockchain Association of Nigeria (SiBAN) argued that the group had made efforts since 2017 to engage the CBN to regulate the cryptocurrency market in the country but to no avail. In this case, he agreed that the market is not regulated.

Former Deputy Governor of the CBN, Kingsley Moghalu, had also faulted the apex bank over the ban. He posited that the world is going digital and there is a lot of innovation of which cryptocurrencies are part.

Others argued that economies such as Bolivia, Kyrgyzstan, Ecuador, Saudi Arabia, Jordan, Iran, Bangladesh, Nepal, and Cambodia, developed economies like Japan, South Korea, Switzerland, Singapore, Portugal, USA, UK, Canada Australia, and France all have positive dispositions towards crypto.

There was an argument that crypto had been a source of job opportunity for the youth. The CBN governor and DG SEC are expected to brief the Senate panels on the opportunities and threats of cryptocurrency on the nation’s economy.

Wherever we go from here should be guided by the claims and red flags of FBI and the President of the European Central Bank.

Let us look our sides as Bus Conductor would say.

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