WHY THE CBN BANNED CRYPTOCURRENCY TRANSACTIONS

By Nanah hauwa isah

" Cryptocurrencies are viewed as illegal because they are not issued by any recognized monetary institution and do not hold any legal status that can make them equivalent to money"(PBOC)

So many controversies  have emerged since the ban of Cryptocurrency-related transactions in Nigeria.

many people (mostly youths) have frowned at it with the thought that it is inimical to the development of Technology-driven payment system in Nigeria.

However, The Central bank of Nigeria has addressed the public on why cryptocurrency was banned and how the  policy is in the best interest of the country.

The regulator said this in a statement on sunday, days after affirming a 2017 directive to financial institutions to block cryptocurrency accounts.

Although, Nigeria  is the world’s second-biggest user of virtual currencies like Bitcoin but not the first country to place ban on the use of cryptocurrency. The world second richest country China with a GDP of $14.34 trillion alongside 15 other countries including Canada have  all placed certain level of restrictions on financial institutions facilitating cryptocurrency transactions, because  transacting in cryptocurrencies portend risk of loss of investments, money laundering, terrorism financing, illicit fund flows and criminal activities.

The acting Director, Corporate Communications, Osita Nwanisobi said the ban on such transactions will not have any negative impact on fintechs or technology driven payment system. He also mentioned that 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 use of cryptocurrencies in Nigeria are a direct contravention of existing law,” the statement said. “It is also important to highlight that there is a critical difference between a Central Bank issued Digital Currency and cryptocurrencies. As the names imply, while Central Banks can issue Digital Currencies, cryptocurrencies are issued by unknown and unregulated entities,” Mr Nwanisobi said.

For further clarifications, cryptocurrencies are digital or virtual currencies issued by largely anonymous entities and secured by cryptography. Cryptography is a method of encrypting and hiding codes that prevent oversight, accountability, and regulation. 

“The question that one may need to ask therefore is, why any entity would disguise its transactions if they were legal,” he added.

“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.

“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.

“The role of cryptocurrencies in the purchase of hard and illegal drugs on the darknet website called “Silk Road” is well known. They have also been recent reports that cryptocurrencies have been used to finance terror plots, further damaging its image as a legitimate means of exchange.

“Moreso, repeated and recent evidence now suggests that some cryptocurrencies have become more widely used as speculative assets rather than as means of payment, thus explaining the significant volatility and variability in their prices.”

See also: Cbn update its customers on Domiciliary account regulations