The Central Bank of Nigeria has justified the ban to banks from transacting in cryptocurrencies insisting that the currencies fuel illicit financial flows, terrorism and drugs purchase. A statement yesterday by Osita Nwanisobi, Acting Director, Corporate Communications, CBN, said the decision of the CBN was not in any way negatively impacting fintechs as there were other robust platforms they could thrive.
The statement read: “In light of the fact that cryptocurrencies are issued by unregulated and unlicensed entities, their use in Nigeria goes against the key mandates of the CBN, as enshrined in the CBN Act (2007), as the issuer of legal tender in Nigeria. In effect, the use of cryptocurrencies in Nigeria are a direct contravention of existing law. 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”.
The CBN further argued that the very name and nature of “cryptocurrencies” suggested that its patrons and users valued 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 wondered adding that “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.”More also, 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. “Because the total number of Bitcoins that would ever be issued is fixed (only 21 million will ever be created), new issuances are predetermined at a gradually decelerating pace. This limited supply has created a perverse incentive that encourages users to stockpile them in the hope that their prices rise. Unfortunately, with a conglomeration of desperate, disparate, and unregulated actors comes unprecedented price volatility that have threatened many sophisticated financial systems.”The price of ether, one of the largest cryptocurrencies in the world, fell from $320 to US$0.10 in June 2017. The price of Bitcoins has also suffered similar volatilities thus making them unreliable.”