Virtual currency trading is not just new globally. In 2009, and against the backdrop of the financial crisis of 2007-2008, an anonymous person or group called ‘Satoshi Nakamura’ created the first decentralised virtual currency, or crypto-currency, the Bitcoin.
Much more revolutionary than Bitcoin is the technology behind it called Blockchain. The idea of a network of users that validates transactions through its user collective instead of a middle man (a bank) was ground-breaking.
Transactions can take place much quicker, easier and cheaper. The technology is not limited to virtual currencies but can work for almost every type of transaction between parties.
Bitcoin trading gained much fame in 2016 during the recession in Nigeria just as Ponzi schemes developed like MMM, Get Help World Wide, Twinkas and others.
However, due to the technicalities involved in learning the process, many Nigerians stuck to the Ponzi schemes until recently when knowledge of the blockchain technology began to expand in the country.
In 2017, the Central Bank of Nigeria (CBN) issued a circular precisely on January 12, warning that the regulator does not guarantee any risk involved in such commercial banks which it regulated.
This was the warning it re-echoed last Friday while prohibiting the banks from maintaining accounts for the operators of crypto currency.
“Accordingly, all DMBs, NBFIs and OFIs are directed to identify persons and/or entities transacting in or operating crypto currency 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.”
Implications
According to experts who had raised concern over the crypto currency operations, they said it was threatening the legal tender in Nigeria – Naira.
Daily Trust learnt from industry sources that the latest move was coming shortly after a cyber-criminal cartel hijacked the data of one of the banks and demanded ransom in bitcoins.
In 2019, there was a reported kidnap of the daughter of a prominent politician in Abuja and the abductors were demanding ransom in bitcoins.
Bitcoin which is a digital currency is difficult to trace and can be easily converted to the local legal tender hence, poses risk of over circulation of money that could disrupt the economic system.
Although the CBN was not against the use of crypto currencies and has not banned any individual from using it, CBN was doing its job to check unregulated actors from using the platforms of institutions it regulates for illegal transactions.
This is what is happening in other climes like in Turkey where the use of crypto currency has been banned. However, in India, two crypto currency banks have been commissioned by the government as it gained recognition in the country.
Many Nigerians reacted to the CBN directive last weekend including a former vice president, Atiku Abubakar, who said the plan to prohibit crypto currency transactions will restrict the inflow of capital into Nigeria.
“The number one challenge facing Nigeria is youth unemployment. In fact, it is not a challenge, it is an emergency. It affects our economy and is exacerbating insecurity in the nation,” Atiku said.
He however called for the regulation of the industry, not prohibition, citing that “there is already immense economic pressure on our youths.
“CBN contradicts SEC”
Other suggest that CBN should understudy it and roll out regulations rather than banning banks from accepting transactions. A lawyer and an associate within the Corporate Finance and Capital Markets Department of SPA Ajibade & Co., Olayanju Phillips, said the CBN directive contradicts those of the Securities and Exchange Commission (SEC) and the National Information Technology Development Agency (NITDA).
He recalled that SEC had recently on its website said crypto-assets (such as crypto currencies) as securities, which may be offered to the public. However, with the CBN ban, it is technically illegal to purchase these securities
NITDA is also promoting the safe use of crypto-currencies and block chain technologies, he noted.
“Alternatively, the CBN may have developed a regulatory sandbox specifically for crypto currency innovations. This would have afforded the CBN a better opportunity to understand the risks and more so, the opportunities for the country to explore the industry,” said Philips.
However, following the latest CBN directive, some operators of crypto currencies have halted Naira transactions while others are finding a way around it.
Luno, a crypto currency company, which currently has over 4 million customers said it is pausing Naira deposits while seeking further clarity from the authorities.
Binance, another crypto currency exchange has suspended Nigerian Naira deposit.
“However, our NGN payment partners are suspending deposit services until further notice from 7pm on February 5, 2021.
However, a trader said one can still transact but that the narration on the bank account won’t quote crypto currency. Also, you may not be able to transact using a crypto account but through a debit card.
From Sunday Michael Ogwu, Christiana Alabi (Lagos) & Chris Agabi, Simon E. Sunday (Abuja)
