Nigeria’s management regime for digital assets like cryptocurrencies has come under fresh pressures with discordant tunes from the two regulatory bodies namely, the Central Bank of Nigeria (CBN) and the Securities and Exchanges Commission (SEC). The latter had recently issued fresh guidelines for regulating the operation of digital asset by exchanges in the country, even as the CBN had since January 12 2017, placed a blanket ban on banks in respect of operations in cryptocurrency accounts. To accentuate its zero tolerance of cryptocurrency transactions, the CBN had reiterated its 2017 ban in 2018 as well as 2021, and sternly directed banks to stick to its 2017 embargo.
However, about a fortnight ago, the SEC issued fresh guidelines on administering cryptocurrency exchanges which are business outfits that facilitate transactions in cryptocurrency. Titled ‘New Rules on Issuance, Offering, Platform and Custody of Digital Assets’, they are coming as a back-up to SEC’s earlier guidelines issued on September 14, 2020. Against the backdrop of the apparent policy mismatch in the respective positions of the CBN and SEC, dealers and investors in cryptocurrency in Nigeria are now in a quandary over which authority to comply with. Meanwhile, these dealers and investors, all have a common recourse to banks which are restricted by the CBN from engaging in cryptocurrency transactions.
Incidentally, viewed from a traditional perspective, the respective positions by both institutions enjoy merit, as their arguments offer strong points to justify their claims. For instance in issuing its 2021 circular reiterating the ban, the CBN justified its stand with its traditional concern over the protection of unwary investors who could easily be shortchanged by unscrupulous dealers since cryptocurrencies are not available in physical form like cash but are virtual, leaving only computer literate persons to appreciate their status. The CBN clarifies that it only intends to protect public interest with the ban as the wide range of cryptocurrencies are neither legal tender, nor traded on regulated platforms. This condition implies that unwary customers run the risk of losing their money to fraudsters. And to accentuate the case of the apex bank, are the daily trending stories of high value fraud cases across the country, involving millions and billions of naira and foreign currencies. If these instances can occur with traditional financial transactions featuring regular processes, it is easy to imagine what would happen when the unregulated regime of cryptocurrencies will be common place.
On the other hand, the SEC seems to be guided by the growing usage by the Nigerian public and elsewhere, and remains inclined to commence credible engagement with the cryptocurrency phenomenon in the country. Hence its guidelines aim to achieve an early interface with stakeholders in the terrain by requiring all exchanges issuing cryptocurrencies to register formally with it. This initiative will give it the handle to facilitate compliance with regulations in respect of cryptocurrency transactions. Besides, the foregoing position of SEC seems to enjoy a boost with the call by the International Monetary Fund (IMF), that all new payment systems should accommodate cryptocurrencies. Hence SEC claims that its new guidelines are designed to accentuate the objective of predisposing the country towards the inevitable adoption of cryptocurrencies. In that respect, its guidelines are aimed at three policy objectives which are, to be abreast of innovations in cryptocurrency transactions, deepening the Nigerian market for cryptocurrencies and providing solutions to problems. In essence the positions of the SEC and the IMF are inspired by the growing popularity of cryptocurrencies as they provide flexibility in transactions and payment systems.
It is, therefore, in the interest of the general public that both the CBN and SEC harmonise their respective positions and toe a common path that will provide relief for Nigerians who are interested in cryptocurrency transactions. The imperatives of providing quality service to the public dictates that they harmonise their operational modalities in a manner that will accommodate the valid concerns of the CBN over safety of investors funds and the need to move towards the attainment of parity with the cutting edge of the cryptocurrency regime. It is understandable that the two institutions are established to operate in separate operational terrains. While the CBN is primarily intended to administer the affairs of the money market, the SEC is to do same for the capital market. The meeting point between them is that the banks and some other financial institutions in the industry operate in both.
Nevertheless, such expectations are not without challenges that must be addressed, for them to materialise. From the bearish stance of the CBN, it is apparent that there is a lacuna with respect to capacity in effective administration by the institution of the country’s money market. This weakness has constrained it from being ambitious towards accepting extra responsibility as the adoption of cryptocurrency will entail. It is time for the CBN to consider ways by which the country can benefit from whatever dividends may accrue from the new cryptocurrency regime without losses to anyone. Both organs of government must work together to chart a way forward.
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