CBN: Hash Reactions Trail Apex Bank’s Ban on Cryptocurrency

By Fola James

The Central Bank of Nigeria, CBN has disclosed that no going back on the ban on commercial banks and other financial institutions from trading in cryptocurrency, in line with its argument that the digital currency promotes terrorism and fraud. Last week the Godwin Emefiele-led apex bank issued a statement warning Deposit Money Banks, DMBs and others to expect sanctions if they violate the directive.

The CBN said in a circular that “Further to earlier regulatory directives on the subject, the Bank hereby wishes to remind regulated institutions that dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited.

“Accordingly, all DMBs, NBFIs and OFIs are directed to identify persons and/or entities transacting in or operating cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately.

“Please note that breaches of this directive will attract severe regulatory sanctions. This letter is with immediate effect.”

The directive has, however, attracted divergent views from Nigerians such as a former Vice President Atiku Abubakar who urged the CBN to take a second look at the ban, after reports filtered in that the apex bank has started beaming searchlight on account owners, trading in digital currency with the aim of closing such accounts.

Atikun said “The number one challenge facing Nigeria is youth unemployment. In fact, it is not a challenge, it is an emergency. It affects our economy, and is exacerbating insecurity in the nation. What Nigeria needs now, perhaps more than ever, are jobs and an opening up of our economy, especially after today’s report by the National Bureau of Statistics indicated that foreign capital inflow into Nigeria is at a four year low, having plummeted from $23.9 billion in 2019, to just $9.68 billion in 2020. Already, the nation suffered severe economic losses from the border closure, and the effects of the #COVID19 pandemic.

This is definitely the wrong time to introduce policies that will restrict the inflow of capital into Nigeria, and I urge that the policy to prohibit the dealing and transaction of cryptocurrencies be revisited.It is possible to regulate the sub sector and prevent any abuse that may be inimical to national security. That may be a better option, than an outright shutdown. There is already immense economic pressure on our youths. It must be the job of the government, therefore, to reduce that pressure, rather than adding to it. We must create jobs in Nigeria. We must expand the economy. We must remove every impediment towards investments. We owe the Nigerian people that much

A newspaper, at the weekend claimed that the clamp down on suspicious accounts came on the heels of intelligence report from the Federal Bureau of Intelligence, FBI that cryptocurrency accounts are being used by terrorists and fraudsters to funnel illegal funds to promote their activities.

In the report by THISDAY, the federal government and CBN were said to have received intelligence report from 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. The CBN insist that the restriction regime is to protect Nigerians and the financial system.

Nigerians are not taking the CBN action lightly, particularly traders who insist that the ban was a knee jack approach on the part of the regulator. For instance, a former CBN Deputy Governor and Presidential candidate, Kingsley Moghalu, said the apex bank has destroyed the livelihood of many Nigerians. According to him, digital currency trading is what many Nigerians are using to eke a living, and that such people have now been thrown under the bus as a result of the reckless regulation. He said the CBN should introduce Central Bank Digital Currency, CBDC as has been done by other countries such as China and others.

He further explained that Nigeria is among the top 10 countries with digital currency usage, a point he said should make the apex bank to retrace it tracks over the ban. He said the argument by CBN, that it took the action to protect National security is untenable, adding that all medium of exchange have their attending risks.

He described the ban as a “declaration of war by third world countries” when developed economies are trying to find a way around it. “Many central banks are not comfortable with the cryptocurrency, but they are trying to find a way around it so that it will not bring down the financial system. We are in depressed economy many Nigerians are making a living from trading in digital currency. CBN should take a risk management approach” rather than an outright ban. He noted that the CBN should not embark on a popularity contest with other countries that have taken similar action.

Meanwhile, analysts insist that terrorism and fraud cannot be used as the basis for destroying the potentials of digital currency trading. What the CBN should do, according to digital currency experts, is to ensure that cryptocurrency does not replace the naira as the nation’s legal tender.

On his part, Senator Iheyen, President Blockchain Technology Association of Nigeria, SiBAN said the CBN took a right decision on the issue.

Others insist that the clamp down constitute a minus for the country at a time that a former Finance Minister, Ngozi-Okonjo Iweala is set to become the Director General of the World Trade Organisation, following her endorsement at the week end by the United State President Joe Biden.