On the 5th of February, the Central Bank of Nigeria (CBN) sent out a circular to commercial banks reminding them that “dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited” and ordering them to close any accounts transacting with cryptocurrencies.

Two days later, the CBN followed up with a statement clarifying their reason for the ban: they see cryptocurrencies as a threat to the country’s financial system.

In the statement, the CBN reminds the public that there are no new restrictions on cryptocurrencies and existing regulations seem to have been ignored by the general public. 

It goes on to state that its position is not any different from that of countries like China, Canada, Egypt, Iran, and 12 others who have prohibited the use of cryptocurrencies in one way or the other. 

More specifically, the CBN is concerned about the fact that cryptocurrencies are issued by unregulated and unlicensed entities, and that their use in Nigeria goes against its key mandates enshrined in the CBN Act (2007) as the issuer of legal tender in Nigeria.

“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.” 

The CBN stated that famed investor Warren Buffett described cryptocurrencies at different points  as “rat poison squared,” “mirage,” and a “gambling device.” An indicator, according to the statement, that cryptocurrencies are purely speculative.

“Given that, unlike fiat money which is accompanied by full faith and comfort of a country or central bank, cryptocurrencies do not have any intrinsic value and do not generate returns by themselves. When one buys a stock, say of a conglomerate in the Nigeria Stock Exchange, its price reflects the activity and production of that conglomerate and the value people place on their goods and/or services.”

Another reason mentioned is that cryptocurrencies are increasingly being used for money laundering, terrorism financing, and other criminal activities due to the anonymity that they provide.

According to an investigation by THISDAY, the CBN was recently alerted by the FBI that scammers were using cryptocurrencies to defraud people. This move, according to the CBN, is to protect people from fraud and discourage money laundering.

“The FBI had discovered that fraudulent Nigerians, popularly known as yahoo boys, took control of large chunks of money released as stimulus in the wake of the devastating effects of the COVID-19, which has put many Americans out of jobs.”

Also, according to highly placed sources within the presidency, “These fraudsters remitted between $200 and $300 million to Nigeria every week, using cryptocurrencies. The Central Bank and the federal government were clearly alarmed by this development and had to act fast before irreparable damage is done to the economy.”

The statement ends with the central bank saying it finds “no comfort” in the use of cryptocurrencies and that it will “do all within its regulatory powers to educate Nigerians to desist from its use and protect our financial system from activities of fraudsters and speculators.” 

Daniel Adeyemi | Author

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