Several concerns awashed the social media following the recent circular issued by the Central Bank of Nigeria (CBN) to Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs) and Other Financial Institutions (OFIs) to close all accounts involved in dealing with cryptocurrencies or facilitating payments for cryptocurrency exchanges in the country. According to the CBN, the policy directive became necessary due to the opacity of cryptocurrencies that have made them become well-suited for conducting many illegal activities such as money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion. The CBN also noted that unlike Fiat Money which is accompanied by full faith and comfort of a country or Central Bank, cryptocurrencies do not have any intrinsic value and do not generate returns by themselves and are highly volatile.
Cryptocurrency is a digital currency built on blockchain technology designed to serve as a medium of exchange stored in a virtual wallet and regarded as the future of money as it is intended to solve the limitations of the traditional paper money including cross-border payments. Over 6,000 cryptocurrencies exist in the world, one of which is the Bitcoin (BTC) being the most valuable crypto. Available data from Paxful, a peer-t0-peer (P2P) bitcoin exchange, showed that Nigeria was the second world largest and African biggest bitcoin market between the period of 2015-2020 with a volume of 60,215 btc. The year 2020 saw a surge in bitcoin price as investors including institutional investors perceived the digital asset to be a safe haven amid the economic downturn caused by the Covid-19 pandemic and in a similar vein, other cryptocurrencies saw uptick in prices.
While we recognize the validity of some of the Apex banks fears, many stakeholders see the decision as despotic and irrational. Since there’s no law in Nigeria that criminalizes cryptocurrencies, many do not see the need for the CBN to deny banking access to an entire industry. The CBN had in 2017 warned that cryptos were not legal tender, and any bank that performs any crypto transaction does so at its own risk. This also appears to contradict SECs position in announcing its guidelines to regulate cryptocurrencies. The CBN however reiterated that it has no comfort in cryptocurrencies at this time and will continue to do all within its regulatory powers to educate Nigerians to desist from its use and protect our financial system from activities of fraudsters and speculators. The CBN also clarified that no new restrictions on cryptocurrencies had been placed on banks, given that all banks in the country had earlier been forbidden, through CBNs circular dated 12 January, 2017, to use, hold, trade and/or transact in cryptocurrencies.
Despite the increasing acceptance of cryptocurrencies, its legal status varies considerably across various countries and jurisdictions. While some countries have clearly permitted their use and trade, others have put in place strong restrictions, while others have banned them out rightly. In our view, the CBN needs to look at the implication of this policy holistically while carrying all stakeholders.
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