For the umpteenth time, the Central Bank of Nigeria (CBN) insisted on Tuesday its decision to impose restrictions on trading on cryptocurrencies and other virtual assets in Nigeria by commercial banks and other financial institutions was in the best interest of Nigerians.
The CBN governor, Godwin Emefiele told the joint Senate Committee on Banking, Insurance and Other Financial Institutions; ICT and Cybercrime; and Capital Market, the apex bank’s decision was to save the country’s financial system as part of its regulatory mandate on financial systems stability.
“The CBN decision to prohibit deposit money banks, non-banking institutions and other financial institutions from facilitating trading and dealings in cryptocurrency and other virtual assets was in the best interest of Nigerian depositors and the country’s financial system,” Mr Emefiele said.
Describing operations of cryptocurrencies as dangerous and opaque, the CBN Governor said the use of cryptocurrency contravened existing laws, given that cryptocurrencies were issued by unregulated and unlicensed entities contrary to the mandate of the CBN as enshrined in the CBN Act (2007) as the issuer of legal tender in Nigeria.
Differentiated between digital currencies, which Central Banks can issue and cryptocurrencies issued by unknown and unregulated entities, the CBN governor said the anonymity, obscurity and concealment of cryptocurrencies makes it suitable for those indulging in illegal activities such as money laundering, terrorism financing, purchase of small arms and light weapons and tax evasion.
Citing instances of investigated criminal activities linked to cryptocurrencies, Mr Emefiele said the legitimacy of money and the safety of Nigeria’s financial system was central to the mandate of the CBN.
“Cryptocurrency is not legitimate money” because it is not created or backed by any Central Bank. Cryptocurrency has no place in our monetary system at this time, and cryptocurrency transactions should not be carried out through the Nigerian banking system,” he told the lawmakers.
The apex bank’s actions, he maintained, were not in any way, shape or form inimical to the development of FinTech or a technology-driven payment system.
On the contrary, he said the Nigerian payment system had evolved significantly over the past decade, surpassing those of many of its counterparts in emerging, frontier and advanced economies boosted by reforms driven by the CBN.
Urging that the issue of cryptocurrency be treated with caution, the CBN governor assured that the Bank would continue its surveillance and deeper understanding of the digital space to protect the system.
“The ultimate goal of the CBN was to do all within its regulatory powers to educate Nigerians on emerging financial risks and protect our financial system from the activities of currency speculators, money launderers, and international fraudsters,” Mr Emefiele said.
On insinuation about the existence of a policy contradiction between the CBN and Securities and Exchange Commission (SEC) directives, the Director-General of SEC, Lamido Yuguda, who also spoke at the meeting clarified that there was no such issue on the subject of cryptocurrencies in Nigeria.
Mr Yuguda said the SEC made its pronouncement on the subject at the time to provide regulatory certainty within the digital asset space due to the growing volume of reported flaws.
Prior to the CBN directive, he said SEC had, in 2017, cautioned the public on the inherent risks in investing in digital and cryptocurrency, adding that the CBN, Nigeria Deposit Insurance Corporation (NDIC) and the SEC between 2018 and 2020 also issued warnings on the lack of protection in investments in cryptocurrency.
The SEC DG further disclosed that following the CBN directive, the SEC had put on hold the admittance of all persons affected by CBN circular into its proposed regulatory incubatory framework to ensure only operators that are in full compliance with extant laws and regulations are admitted into the framework for regulating digital assets.
Similarly, the Chairman of the Independent Corrupt Practices and Other Related Offences Commission (ICPC), Bolaji Owasanoye highlighted the risks inherent in investing in virtual assets and cryptocurrencies in Nigeria.
Mr Owasanoye said cryptocurrencies posed serious legal and law enforcement risks for Nigeria due to its opaque nature and illicit financial flows, adding that the current move by the Federal Government to link National Identification Numbers with SIM cards attested to the fact that terrorists, kidnappers, bandits and perpetrators in illegal acts had relied on the shield provided by anonymity to commit heinous crimes.
Earlier in his welcome remarks, the Chairman of the Joint Senate Committee, and Chairman, Senate Committee on Banking, Insurance and Other Financial Institutions, Uba Sani, said the committee was on a fact-finding mission and had no preemptive recommendation or stand on the issue.
He said the Committee would make its position known only after it had reviewed the submissions made by stakeholders.
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