Why FG Banned Cryptocurrency |The Source

By Uche Mbah

Facts are, gradually, emerging on the thinking behind the Central Bank’s  ban on Cryptocurrency trading in Nigeria, a decision that has generated uproar and heated debate since it was found out to be the easiest way the younger generation is making lots of cash under the present economic conditions in the country.

Sources talked to  over the weekend told this magazine it has much to do with capital flight, money laundering, and more.

Indications are that due to the fear over the collapse of the economy, poor economic policies, and excessive borrowing, many foreigners-and foreign firms are poised to repatriate their money out of the country. Besides, many government officials allegedly are moving their money out of the country. This runs into billions of dollars which will further weaken the economy and send inflation into overdrive.

“Most of the ransom allegedly paid by the Government  are being repatriated out to some other African countries who are complicit in the spread of ethnic dominance of the country by certain groups.

The CBN has resisted the level of an unprecedented capital flight being witnessed in Nigeria”, a source told this magazine. With the hardline stance of the CBN, they are resorting to Cryptocurrency conversion to move such monies. This has mostly increased the volatility of Deposit money banking.

Recall that during the #endsars protest, the CBN attempted to freeze the accounts of the sponsors, but they moved fundings to cryptocurrencies. this was difficult or near impossible- to monitor. this is because Cryptocurrencies are operated outside the Central

ng system because it is a people-based virtual currency that is not bank regulated as such.

But the current issue allegedly  comes from attempts to block the diaspora donations to the activities of Sunday Igboho, who has been fighting the cause of the Yoruba race against herdsmen occupying h ancestral lands.

Attempts to block such donations into his accounts and alleged threats to him on this issue resulted in reports that he declared that he does not need diaspora funds to fight the case. but the donations were moved to cryptocurrencies when the Government  crackdown increased.

But a far more global worry is the issue of money laundering of global proportions. Scammers have been having a field day with bitcoin, the most popular and arguably oldest of the cryptocurrencies, to divert stimulus packages from the united states to Nigeria.

This is made possible because the regulation on cryptocurrency is weak currently, and centralized banking is having sleepless nights over it.

The President of the European Union Central Bank , Christine Lagarde, recently lamented the issue of weak regulation of the currency.

“It’s a highly speculative asset that has led to some reprehensible activity, including money laundering and any loopholes need to be closed.

“There has to be regulated. This has to be applied and agreed upon at a global level because if there is an escape that escape will be used”, she was quoted to have said recently.

The cryptos are commodity-backed, and the commodity of most choice is gold. It is said that over $300 million is being remitted to Nigeria on weekly basis through a bitcoin wallet, making Nigeria the second biggest user of cryptocurrency in the world.

Recall that the Central Bank had instructed deposit money banks and others to stop bitcoin transactions. In a circular to banks, the CBN said:

“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,”

Unfortunately, the directive may have little impact on the transactions using bitcoin and other cryptocurrencies. It is only when a transaction is labeled as a crypto transaction that it will be tracked. This is because the transactions are encrypted end to end in a complex movement of virtual cash and commodity.