The Central Bank of Nigeria (CBN) has reacted to condemnations trailing the directive to Deposit Money Banks to desist from transacting in cryptocurrencies.
In a statement on Sunday, Osita Nwanisobi, Acting Director, Corporate Communications, clarified that that the CBN circular of February 5, 2021 did not place any new restrictions on cryptocurrencies.
He recalled that all banks in the country had earlier been forbidden, through CBN’s circular dated January 12, 2017, not to use, hold, trade and/or transact in cryptocurrencies.
Nwanisobi noted that the CBN’s position on cryptocurrencies is not an outlier as many countries, central banks, international financial institutions, and distinguished investors and economists have also warned against its use.
He said China, Canada, Taiwan, Indonesia, Algeria, Egypt, Morocco, Bolivia, Kyrgyzstan, Ecuador, Saudi Arabia, Jordan, Iran, Bangladesh, Nepal and Cambodia have all placed a certain level of restrictions on financial institutions facilitating cryptocurrency transactions.
CBN said in China, cryptocurrencies are completely banned and all exchanges closed as well.
Nwanisobi said even famed investor Warren Buffett has called cryptocurrencies “rat poison squared,” a “mirage,” and a “gambling device.”
“Mr. Buffett believes it is a “gambling device” given that they are mostly valuable because the person buying it does so, not as a means of payment; but in the hope they can sell it for even more than what they paid at some point.
Nwanisobi said first, in light of the fact that they are issued by unregulated and unlicensed entities, their use in Nigeria goes against the key mandates of the CBN, as enshrined in the CBN Act (2007), as the issuer of legal tender in Nigeria. In effect, the use of cryptocurrencies in Nigeria are a direct contravention of existing law.
He highlighted the critical between a Central Bank issued Digital Currency and cryptocurrencies, adding that as the names imply, while Central Banks can issue Digital Currencies, cryptocurrencies are issued by unknown and unregulated entities.
“Second, the very name and nature of “cryptocurrencies” suggests that its patrons and users value anonymity, obscurity, and concealment. The question that one may need to ask therefore is, why any entity would disguise its transactions if they were legal.
It is on the basis of this opacity that cryptocurrencies have become well-suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion.
“Indeed, many banks and investors who place a high value on reputation have been turned off from cryptocurrencies because of the damaging effects of the widespread use of cryptocurrencies for illegal activities.
CBN stressed that its actions are not in any way, shape or form inimical to the development of FinTech or a technology-driven payment system.
The apex bank said to the contrary, the Nigerian payment system has evolved significantly over the last decade, leapfrogging many of its counterparts in emerging, frontier and advanced economies propelled by reforms driven by the CBN.
The statement said this was evident from the variety of participants, products, channels, cutting-edge technology in the payments system.
CBN said the system was validated by the astronomical growth of volume/value of transactions and the fact that Nigeria is an investment destination of choice for international financial technology companies because of CBN’s policies that have created an enabling investment environment in the payments system.
