Cryptocurrency and Digital Currency Debate in Nigeria, by Inyene Ibanga
In early February this year, the Central Bank of Nigeria (CBN) issued a circular to banks and financial institutions, warning that transactions and the facilitation of payments for cryptocurrency exchanges were prohibited.
The CBN further ordered all banks and financial institutions to identify and close accounts associated with individuals or entities that conduct cryptocurrency transactions and operate cryptocurrency exchanges. According to the bank, it was a reminder of the directive it issued in 2017.
Justifying the directive, CBN Governor Godwin Emefiele said cryptocurrencies were being used to facilitate scams and money laundering, which were very hostile to the economy and could further weaken the naira.
The directive has received support from Nigeria’s anti-corruption agencies, the Economic and Financial Crimes Commission (EFCC), the Independent Commission on Corrupt Practices and Other Related Offenses (ICPC) and the Nigerian Financial Intelligence Unit (NFIU) .
EFFC, through its chairman Abdulrasheed Bawa, views cryptocurrencies as a means by which criminals launder the proceeds of crime and illicit financial transactions, claiming the Commission had recovered cryptocurrency loot worth about $ 20 million from cybercriminals.
Likewise, ICPC President Bolaji Owasanoye believes cryptocurrencies could be used to fund insurgencies, adding that the #EndSARS protest was largely funded by cryptocurrency.
Anti-graft agencies have revealed that they currently have a number of cryptocurrency-related cases but have not been able to track suspects, noting that it would be difficult to resolve cases involving cryptocurrency. cryptocurrencies because the actors were unknown.
As a result, the Securities and Exchange Commission (SEC) has suspended the approval of cryptocurrencies and related products in Nigeria. This came after his previous indication to accept bitcoin. The capital market regulator would only allow these digital currencies if they maintain bank accounts within the Nigerian banking system.
But a storm of backlash inside and outside the cryptocurrency community continued to follow the apex bank’s directive, raising concerns that the ban could negatively impact fintechs and hamper the potential. growing Nigerian economy.
Given the growing global popularity of the cryptocurrency phenomenon, which is used in over 100 countries, and Nigeria’s ranking as the world’s second-largest user of virtual currencies, the CBN Directive has succeeded in sowing anxiety in the cryptocurrency community.
In a reaction described by many as political, Vice President Professor Yemi Osinbajo challenged that rather than a blanket ban on cryptocurrencies, the situation actually called for a more robust regulatory framework that addresses concerns raised about cryptocurrencies. cryptos without killing the growing potentials of digital currencies for the country’s economy.
A cryptocurrency is an encrypted digital or virtual currency intended to be a medium of exchange. It is a form of payment that can be exchanged for goods and services online. Many companies have issued their own currencies, often called tokens, and these can be exchanged specifically for goods or services provided by the company.
Cryptocurrencies work through blockchain, which is a decentralized technology spread over many computers, which manages and records transactions.
Over 10,000 different cryptocurrencies are publicly traded, but Bitcoin, Ethereum, Tether, Binance Coin, Dogecoin, and Litecoin are among the top ten most traded cryptocurrencies in the world by market cap.
In May, the total value of all cryptocurrencies exceeded $ 1.7 trillion, while the total value of all bitcoin, the most popular digital currency, was around $ 735 billion.
One of the main advantages of cryptocurrency is that it prevents central banks from managing the money supply, which is why many people have rushed to buy them. It has the potential for high returns and diversification.
In addition, international cryptocurrency transactions are also faster than wire transfers. Cryptocurrency transactions only take a few minutes or even seconds. And everyone is free to use cryptocurrency, without needing to create a bank account, which requires documents and other documents.
Another advantage is the blockchain technology behind cryptocurrencies. Blockchain’s advanced decentralized processing and recording system makes cryptocurrencies more secure than traditional payment systems.
Yet with cryptocurrencies, transaction costs are much lower unlike the fees for transferring money from a digital wallet to a bank account. Transactions can be done at any time of the day or night, and there is no limit on purchases and withdrawals.
However, the downside of cryptocurrencies is that they are mostly driven by the private sector, with no official oversight or regulation. This means that cryptocurrencies can be easily exploited by criminals to carry out fraudulent and other illegal activities, such as terrorist financing, insurgency, and political instability.
The CBN later explained that its warning did not prevent Nigerians from transacting in cryptocurrencies or holding digital currencies, but was intended to protect the banking industry from cryptocurrency activities.
While agreeing that it is banning cryptocurrency transactions in the banking system, the monetary regulator maintained that it does not impose any restrictions on cryptocurrencies in general, nor does it discourage individuals or entities to exchange them.
Meanwhile, the CBN has announced plans to begin issuing digital currency, an electronic model of banknotes and coins that can be stored in the digital wallet, before the end of this year. The bank said it would make it easier to send international remittances to Nigeria.
With state-regulated digital currency, Nigeria would be able to issue its own sovereign digital currency to complement banknotes and coins. This would help allay CBN fears about the vulnerability of cryptocurrencies to criminal abuse and deepen financial inclusion.
As cryptocurrency gains popularity and global acceptance, apex bank should take steps to create opportunities for dialogue and collaboration with traders and cryptocurrency exchanges.
Therefore, it is important that banking / financial sector regulators focus more on promoting people-friendly policies to enable more Nigerians to take advantage of the growing cryptocurrency market to achieve economic progress.
Inyene Ibanga is Editor-in-Chief of TechDigest and writes from Wuye District, Abuja.