The use of virtual assets and cryptocurrencies in Nigeria is risky for both the people and the economy, the Chairman of the Independent Corrupt Practices and Other Related Offences Commission (ICPC), Bolaji Owasanoye, said on Tuesday.
The Chairman of the anti-graft agency told the Senate Committee on Banking, Insurance and Other Financial Institutions during his hearing on the decision by the Central Bank of Nigeria (CBN) to stop financial institutions from transacting in cryptocurrencies and other virtual assets in the country.
“Virtual assets and cryptocurrencies pose serious legal and law enforcement risks for Nigeria,” the Chairman, who is also a senior advocate of Nigeria (SAN) said.
He said the current National Identification Number (NIN) registration and the ongoing exercise to link the subscriber identity module (SIM) cards by the various IT operators was a pointer to the fact that insurgents, terrorists, kidnappers, bandits, and drug merchants have used the anonymity of unregistered SIM cards to commit their crimes with relative ease.
“Cryptocurrencies guarantees similar anonymity and can easily be used as leverage for terrorist financing and other crimes. With the NIN registration, cryptocurrencies may become an alternative payment platform for kidnappers and this would be impossible for law enforcement to agencies to trace,” he said
Citing a case study of a current investigation by the Commission on money laundering the ICPC boss involving several hundreds of millions of naira.
He said the main suspects use technology in place the money in the banking sector. A sizable amount was traced to several bank accounts but before investigators recovered some of the money, a large proportion had been made to disappear using serpentine ICT-aided transfer schemes that has so far eluded investigators.
“While the persons whose accounts were used have been located, the criminal mastermind has remained invisible and unidentified.
“This real ongoing case is a glimpse into the world of anonymity of virtual or digital transactions. With cryptocurrencies, the wallet of the user of cryptocurrency system only store information, or encrypted links in the Blockchain where transaction confirmation can be found.
“There is no movement of any ‘currency’ in the real sense of the word. By their very nature, they provide considerable anonymity that is almost impossible to be accessed by unauthorized persons, including law enforcement authorities,” the ICPC Chairman said
Mr Owasanoye identified their uses for criminal activities as a major risk associated with virtual assets and cryptocurrencies.
He listed other risks of the use of virtual assets and cryptocurrencies to include: risk to finance of government, risk of theft of cryptocurrencies, abuse as medium of payment for hackers and ransom-ware, risk of exit scams, risks of use of crypto assets for ponzi schemes, risks of tax evasion, and risk as a source of corruption-linked illicit financial flows.
“The use for criminal activities is the most obvious risk of virtual assets and cryptocurrencies. It has been reported that ‘criminally associated bitcoin addresses sent over $3.5 billion worth of bitcoin in 2020.
“This figure includes BTC addresses controlled by dark markets, ransom-ware actors, hackers, and fraudsters. Most of this bitcoin will ultimately need to be laundered by these criminals, meaning it will make its way to an exchange where it can be converted to fiat currencies and transferred to a bank,” the ICPC chairman said.
Making reference to the warning by the financial system regulatory authority, Central Bank of Nigeria, about its inability to regulate monetary policy affecting virtual assets, due to the fact that cryptocurrencies are issued by private foreign entities not issued or regulated by the bank.
Al though he said virtual assets cannot be wished away, as Central Banks in many jurisdictions of the world are considering floating officially recognized cryptocurrencies, the Chairman said he did not know whether the time is right for the CBN to follow suit.
“However, he said the legal guidance is needed if any fresh initiative in the direction of adopting cryptocurrency as official money system becomes legally in force,” he added.