Following the backlash from the public against the Central Bank of Nigeria (CBN) abolition of Cryptocurrency transactions, the apex bank has given reasons for its actions.
A source at the CBN noted that the Act establishing it recognises the naira as the only legal tender in the Nigerian financial system. The CBN, the source noted, never prevented any individual from dealing in Cryptocurrency.
“What the CBN said was that deposit money banks under its purview cannot partake in Cryptocurrency because it will be illegal. It will also undermine monetary policy, which is anchored on naira money supply and demand.
“CBN is also concerned that Bitcoin valuation is excessively speculative, akin to betting, and it will not make sense to run a currency system based gambling. “Why people will come charging on Emiefele over banning banks from digital currencies is inexplicable”, the source noted.
He added that Bitcoin and other variants of digital currencies are not only unregulated the world over, but they are now used as weapons by cyber criminals.
“The last time cyber criminals hijacked the customer database of one of Nigerian banks, they demanded ransoms in Bitcoin before they released the database. And since Bitcoin addresses are pseudonymous, it is not possible to trace them. The CBN cannot fold its arms and see Cryptocurrency destroy the entire banking system with all the unsavoury consequences of banking crisis and bailouts.
“Turkey had also banned Bitcoin because it was becoming a channel for money laundering on an unimaginable scale.
“So, if any Nigerian wants to deal in digital currencies, Bitcoin, or whatever, such a person is free to do so, only that there is no platform for a Cryptocurrency payment system. Accordingly, such a person could as well go to wherever such a platform is legalised since the Bitcoin market is virtual 24/7”, he added.
At the weekend, Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs) and Other Financial Institutions (OFls) were ordered by the Central Bank of Nigeria (CBN) to immediately close all accounts currently used for Cryptocurrency services.
The apex bank gave the directive in a circular released Friday with reference number; BSD/DIR/GEN/LAB/14/001, jointly signed by Bello Hassan, Director of Banking Supervision and Musa Jimoh, Director of Payment System Management Department.
It advised financial institutions to identify persons and/or entities transacting in or operating crypto currency exchanges within their systems and ensure that such accounts are closed immediately. While noting that the order takes immediate effect, the circular warned of severe regulatory sanctions against any defaulting financial institution.