Tuesday, February23, 2021 07:23 PM / by CBN/ Header Image Credit:  Financial Nigeria

The Governor, Central Bank of Nigeria (CBN), Mr.Godwin Emefiele says the Bank's decision to prohibit deposit money banks, non-bankinginstitutions and Other Financial Institutions from facilitating trading anddealings in cryptocurrency is in the best interest of Nigerian depositors andthe country's financial system.

Mr. Emefiele made the declaration on Tuesday,February 23, 2021, while briefing a joint Senate Committee on Banking,Insurance and Other Financial Institutions; ICT and Cybercrime; and CapitalMarket, on its directive to institutions under its regulation.

Describing the operations of cryptocurrencies asdangerous and opaque, the CBN Governor said the use of cryptocurrencycontravened an existing law.  He said giventhe fact that cryptocurrencies were issued by unregulated and unlicensedentities made it contrary to the mandate of the Bank, as enshrined in the CBNAct (2007) declaring the Bank as the issuer of legal tender in Nigeria.

Emefiele, who also differentiated between digitalcurrencies, which Central Banks can issue and cryptocurrencies issued byunknown and unregulated entities, stressed that the anonymity, obscurity andconcealment of cryptocurrencies made it suitable for those who indulge inillegal activities such as money laundering, terrorism financing, purchase ofsmall arms and light weapons and tax evasion.  

Citing instances of investigated criminalactivities that had been linked to cryptocurrencies, he stated that thelegitimacy of money and the safety of Nigeria's financial system was central tothe mandate of the CBN, even as he declared that "Cryptocurrency is notlegitimate money" because it is not created or backed by any Central Bank.

"Cryptocurrency has no place in our monetary systemat this time and cryptocurrency transactions should not be carried out throughthe Nigerian banking system," he added.

Mr. Emefiele also emphasized that the Bank'sactions were not in any way, shape or form inimical to the development ofFinTech or a technology-driven payment system. On the contrary, he noted thatthe Nigerian payment system had evolved significantly over the past decade,surpassing those of many of its counterparts in emerging, frontier and advancedeconomies boosted by reforms driven by the CBN.

While urging that the issue of cryptocurrency betreated with caution, the CBN Governor assured that the Bank would continue itssurveillance and deeper understanding of the digital space, stressing that the ultimategoal of the CBN was to do all within its regulatory powers to educate Nigerianson emerging financial risks and protect our financial system from the activitiesof currency speculators, money launderers, and international fraudsters.

Also speaking, the Director-General of theSecurities and Exchange Commission (SEC), Mr. Lamido Yuguda clarified thatthere was no policy contradiction between the CBN directive and thepronouncements made by the SEC on the subject of cryptocurrencies in Nigeria. Heexplained that the SEC made its pronouncement at the time to provide regulatorycertainty within the digital asset space due to the growing volume of reportedflaws.

Prior to the CBN directive, he said the SEC had, in2017, cautioned the public on the risks involved in investing in digital andcryptocurrency, adding that the CBN, Nigeria Deposit Insurance Corporation(NDIC) and the SEC between 2018 and 2020 had also issued warnings on the lackof protection in investments in cryptocurrency.

Yuguda further disclosed that following the CBNdirective, the SEC had put on hold the admittance of all persons affected byCBN circular into its proposed regulatory incubatory framework in order toensure that only operators that are in full compliance with extant laws andregulations are admitted into the framework for regulating digital assets.

Similarly, the Chairman of the Independent CorruptPractices and Other Related Offences Commission (ICPC), Prof. Bolaji Owasanoye highlightedthe risks inherent in investing in virtual assets and cryptocurrencies inNigeria.

He explained that cryptocurrencies posed seriouslegal and law enforcement risks for Nigeria due to its opaque nature andillicit financial flows, adding that the current move by the Federal Governmentto link National Identification Numbers with SIM cards attested to the factthat terrorists, kidnappers, bandits and perpetrators in illegal acts had reliedon the shield provided by anonymity to commit heinous crimes. 

Earlier in his welcome remarks, the Chairman of theJoint Senate Committee, and Chairman, Senate Committee on Banking, Insuranceand Other Financial Institutions, Senator Uba Sani, said the committee was on afact-finding mission and had no preemptive recommendation or stand and wouldmake its position known only after it had reviewed the submissions made bystakeholders.

Related Links and Post on the CBN Action

1.     SEC Puts on Hold the Assessment of Persons Affected by CBN Directive onCryptos - Feb 12, 2021

2.    CBN Responds to Reactions on Regulatory Directive on Cryptocurrencies -  Feb 07, 2021

3.    Central Banking and the CryptocurrencyChallenge - Call it like it is -  by Tope Fasua, Feb 07, 2021

4.    CBN Tightens Noose on Cryptocurrency Market - Proshare, Feb 05, 2021

5.     A Thread Explaining Whatthe CBN Circular Means and Why the CBN issued It - StearsBusiness, Feb 05, 2021

6.     CBN Circular on CRYPTOCURRENCY:CBN and SEC Singing Discordant Tunes - By StephenAzubuike, Stephen Legal, Feb 05, 2021

7.     The Unsettling Dust overCryptocurrency Transactions  - by James Emejo,ThisDay, Feb 07, 2021

8.     Revealed: How a CriminalCartel Hijacked Bank Data, Demanded Ransom in Bitcoins - by Sanya Adejokun,Tribune, Feb 07, 2021

9.     Feb 05, 2021

10.  More than 1,000cryptocurrencies have already failed - here's what will affect successes infuture - by Gavin Brown and Richard Whittle,The Conversation, Nov 21, 2019

11.  Banning Cryptocurrencywill Give Power to Outlaws - Emeka Okoye, Leadership, 3years ago

12.   VIDEO: 2017 CIBN forumdiscussing blockchain technology in Nigeria - WebTV, 2017

13.  Banking and Bitcoin - CanCrypto Kill the Banks? - by Ivan onTech, Sep 19, 2020

14.  Can Bitcoin Kill CentralBanks? - by James MCWHINNEY, Investopedia,Jun 25, 2019

15.  Central Bank DigitalCurrency and its impact on the banking system: A need for a new payment system -by Zeb, Innovation & Digital, BankingHub, Aug 22, 2018

16.  Why Central Bank DigitalCurrencies will Destroy Bitcoin -by Nouriel Roubini, The Guardian, Nov 19, 2018

17.  (PDF) Fedcoin: A CentralBank-issued Cryptocurrency - by JP Konig, Nov 15, 2016

Related Video

The first video is an excerpt from the 2017 CIBN forum discussing blockchain technology in Nigeria. Mr. Musa Jimoh (the then Deputy Director, Payments CBN) was giving the position of the banking regulator on digital currency. CBN's position has since evolved as changes occurred in adoption, infrastructure, risks & global regulation.

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