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Cryptocurrency

CBN explains why it banned banks from dealing with Cryptocurrencies

The CBN explained in detail its directive to banks to desist from transacting in and with entities dealing in cryptocurrencies.

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CBN reveals framework for the N75 billion Youth Investment Fund, Economic Growth, CBN, Governor, Emefiele, CBN releases new capital base, sanctions for Microfinance Banks, Nigerian Banks broadly positive after naira devaluation, Naira hits N465 to $1, Central Bank begins disbursing $100million to hit at currency speculators, CBN appoints 3 Pre-Shipment Inspection and 2 Monitoring Agents for non-oil exports

The Central Bank of Nigeria, in a press release dated, the 7th of February 2021 has explained in detail the reason for its directive to Deposit Money Banks (DMBs) and other financial institutions to desist from transacting in and with entities dealing in cryptocurrencies.

Issuing a press statement, the CBN said it felt the need to provide further justifications about its position to the general public.

The press statement began with the CBN detailing the nature of cryptocurrencies stating that “Cryptography is a method of encrypting and hiding codes that prevent oversight, accountability, and regulation. While there are a number of cryptocurrencies now in circulation, Bitcoin was the first to be introduced in 2009, and now accounts for about 68 percent of all cryptocurrencies.”

READ: Despite anti-corruption war, EU blacklists Nigeria for money laundering

Even though the circular of February 5 has sparked a lot of reactions, the CBN makes it known that its recent restriction is not new, but only a reminder of the earlier circular that was dated January 2017.

“As regards our recent policy pronouncement, it is important to clarify that the CBN circular of February 5, 2021, did not place any new restrictions on cryptocurrencies, given that all banks in the country had earlier been forbidden, through CBN’s circular dated January 12, 2017, not to use, hold, trade and/or transact in cryptocurrencies,” it stated.

The apex bank further stated that the prohibition of cryptos was not exclusive to Nigeria, as certain levels of restrictions on financial institutions facilitating crypto transactions have been applied in several other countries around the world.

READ: Days of crypto criminals numbered

“They have all made similar pronouncements based on the significant risks that transacting in cryptocurrencies portend-risk of loss of investments, money laundering, terrorism financing, illicit fund flows, and criminal activities. China, Canada, Taiwan, Indonesia, Algeria, Egypt, Morocco, Bolivia, Kyrgyzstan, Ecuador, Saudi Arabia, Jordan, Iran, Bangladesh, Nepal, and Cambodia have all placed a certain level of restrictions on financial institutions facilitating cryptocurrency transactions.

“This is far greater volatility than is found with normal currencies. Let us now turn to some of the justifications for CBN’s recent policy reminder. A perfunctory reflection on the definition of cryptocurrencies can already reveal several problems.”

The Nigerian leading financial regulator also spoke on the fact that some of these cryptos are issued by unregulated and unlicensed entities which begs the question of legality. It also claimed that cryptocurrencies have been used to finance several illegal activities including terrorism and money laundering.

READ: Why Nigerian Crypto community is angry with CBN 

“The question that one may need to ask therefore is, why any entity would disguise its transactions if they were legal. 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.”

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The CBN stated that a significant amount of people used it for speculative purposes rather than payment, citing the flagship crypto model as an example.

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“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.

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READ: Binance, Quidax, Buycoins Africa, Bundle obey CBN’s crypto ban

The Bank concluded by re-emphasising its responsibility to protect investors from a high probability of losses that may arise from dealing in cryptos. The CBN said it would continue to educate Nigerians on the disadvantages of cryptos in the financial system.

“Due to the fact that cryptocurrencies are largely speculative, anonymous, and untraceable, they are increasingly being used for money laundering, terrorism financing, and other criminal activities. Small retail and unsophisticated investors also face a high probability of loss due to the high volatility of the investments in recent times.

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“In light of these realities and analyses, the CBN has no comfort in cryptocurrencies at this time and will continue to do all within its regulatory powers to educate Nigerians to desist from their use and protect our financial system from the activities of fraudsters.”

What you should know

  • The CBN, a few days ago issued a circular prohibiting banks and other financial institutions from carrying out transactions in cryptocurrencies or facilitating payments for crypto exchanges.
  • The CBN’s directive has since gotten very harsh reactions on social media with many condemning the policy as a deliberate attempt by the government to impoverish young Nigerians who have been able to create wealth for themselves through crypto trading.
  • Interestingly, Nigeria along with other countries ranked as the worst countries to start a career do not wholly accept or legally recognize cryptocurrency and other digital assets.

See the CBN circular below:

Download (PDF, 146KB)

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Olumide Adesina is a France-born Nigerian. He is a Certified Investment Trader, with more than 15 years of working expertise in Investment trading. Follow Olumide on Twitter @tokunboadesina. He is a Member of the Chartered Financial Analyst Society.

13 Comments

13 Comments

  1. Church

    February 7, 2021 at 9:23 pm

    They are still hiding in the shadow that’s not the reason why they are doing what they are doing, they are just saying this to cover up the reality…….

  2. Foley Adigun

    February 7, 2021 at 9:31 pm

    Idiocracy, a government of idiots. So cash is not used in money laundering, terrorism etc? They will continue to educate Nigerians to desist?? You don’t educate to desist, as that’s a biased narrative. You just educate. But then how can the uneducated educate? Nigeria and it’s tools of government are ruinous.
    Erm let’s use examples of countries that have chosen to ban crypto while knowingly not mentioning countries like US, UK etc that haven’t. Or let’s conveniently fail to mention that the last Davos G7 summit had Christine Lagarde previously of IMF say about crypto, if we can’t beat them we have to join them which led to countries exploring CBDCs (Central Bank Digital Currencies).
    The whole Nigerian experience is sadly and shamefully a very backward one. A nation in reverse. I literally shake my head at the audacity of dumbness. And that’s what why many of us won’t be coming back to that godforsaken country. Tori don wo wo. I’m a Nigerian at a distance

  3. Jaden

    February 8, 2021 at 2:48 am

    Funny that Nigeria ban crypto yet they are know world wide for email banking scams ? Seems it’s OK for traditional bank scams

  4. Kesiye

    February 8, 2021 at 3:22 am

    The Nigerian government is a killer of her youths. The government has no solid plans for her youths. Check from education to welfare to job creation, the youths are relegated to the background. And any government that does that to her youths is finished. Crypto trading is one major way the youths are using to survive.

  5. Anonymous

    February 8, 2021 at 7:25 am

    Lol… Educate keh… Forex is also speculative was that banned? No… Sport betting is speculative was that banned? No … Infact nearly every business is speculative because plans made can easily be ruined by real time happenings… Worse still is that they try to cloak blatant wickedness as “helping” Nigerians realize that crypto is bad . Bad for who? Bad for the masses or bed for the banks who lose revenue because their incessant charges at the behest of the CBN as well as their domineering control of funds that are not really theirs (also at the behest of the CBN) has forced many to opt for decentralized banking. Crypto isn’t perfect yes but it’s obvious this is a case of calling a dog a noise pollution hazardwhen it barks just so you can “rightously” execute it.

  6. GG lover

    February 8, 2021 at 7:28 am

    Nigeria with new rules every time.
    Will leave This country for una very soon

  7. Anonymous

    February 8, 2021 at 7:29 am

    Look for those frauds and deal with them but leave the poor Nigerians alone. Crypto is in internationally accepted currency, you are unwise to ban it completely. Do you want every Nigerian to become kidnappers?

  8. Franklyspeaking

    February 8, 2021 at 7:56 am

    Lame excuses. We should also close all the banks since most money laundering activities are transacted through them. It clearly shows how ignorant these CBN guys are about crypto, or how manipulative they are and would want to be.

  9. Collins

    February 8, 2021 at 8:31 am

    It is very easy for Nigeria government to copy foreign country to place ban but will never copy them in the way they govern and cherish there people, there slot of infrastructure method they have to copy, but they will not….. May God help us in this country

  10. H. Tee

    February 8, 2021 at 8:43 am

    At this point, CBN needs schooling and this justifies nothing. With or without cryptocurrency, illegal activities still happen anyway. Even within hypocritic CBN, illegal activities aren’t new within the institution, so they should stop acting like they are helping Nigerians.

    By the way, what happened to regulation, what happened to KYC, to help prevent illegal activities. Most of the countries they have mentioned have placed regulatory measures on institutions by ensuring KYC, not an outright prohibition, since they know the economic benefit they stand to gain with inflows. They are here telling us what we already know, whereas they are the learners. Have they thought about the great innovations this brings? No! Apparently, they have not done their assignment to see the greater benefit that surpasses the disadvantages that can easily be curtailed.

    Fix your backyard, before you start fixing something that is already global. Why not even learn from Japan? We are just hear taking steps backward as usual, when the whole world is taking 2 steps forward everyday.

    CBN, how has your monetary policies helped us, than impoverishing the Nation? And you are here saying things that makes no sense. Just pissed with this Nation right now!

  11. Christopher

    February 8, 2021 at 9:09 am

    CBN I believe, has misplaced priority.
    Under their watch, the Dollar to Naira exchange rate has grown from N360.00 to N396.17 with black market operators confidently dealing at N490.00
    One would have thought that this poor trend in the Naira value would be visited but CBN’s concern is crypto currency.
    If CBN is concerned about investments of Nigerians, her duty is to advice.
    On the issue of corruption, there is even more open ended unchecked and indiscriminate abuse of office, embezzlement and diversion which is eating financial resources of this great nation with impunity.
    Is CBN ready to address the actual challenge of our Country?

  12. Precious sarah

    February 8, 2021 at 10:56 am

    Very obvious their white lies…Did we beg them to do this….misplaced priority….evil dont last forever,just painful they will cause damages.Nigeria will be great no matter the evil of this leaders

  13. Dapo

    February 8, 2021 at 4:22 pm

    Nigeria government still don’t know what is going on.

    They are hiding under the shadow of Transaction can’t be traced on Blockchain.

    Why haven’t they banned Betting sites?

    Is it their problem if i lose money to cryptocurrency?

    Sick people in a sick government.

    Should they not know, Nigeria is indirectly strengthening US Dollar.

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Cryptocurrency

Bitcoins dash up strongly amid high buying spree

Bitcoin traded at $48,715.70 with a daily trading volume of $54.8 billion. Bitcoin is up 6.05% for the day.

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MicroStrategy, Data obtained from thecrypto analytics firm says that, the number of Bitcoin addresses having at least 0.1 BTC has risen by 14% over the past one year, Did Satoshi Nakamoto cause the panic sell-off in Bitcoin market, Bitcoin hits $8,826, Pigs hit hard at BTC market, plunges 8%

The price of bitcoin and saw strong gains amid high buying pressures particularly from wealthy investors, as the entire market capitalization surged by 5.62% at the time this report was written.

Bitcoin traded at $48,715.70  with a daily trading volume of $54.8 billion. Bitcoin is up 6.05% for the day.

This is coming on macros suggesting the daily Bitcoin Spent Output Profit Ratio has seen a full reset and turned negative for the first time in five months – investors were on average moving BTC at a slight loss, indicating profit-taking has abated.

In an exclusive interview with Nairametrics, Louis Schoeman, a Snr. Forex analyst at Forexsuggest, a Luxembourg-based currency analytic firm explained the rationality behind Bitcoin’s recent surge.

READ: About 33% of pension funds, hedge funds now own digital assets such as Bitcoin

“A bitcoin market correction has definitely been made in the last 7 days. According to our analysis, the reason for the price rise again is that hedge funds are starting to invest more aggressively in bitcoin,” Schoeman said.

In addition a leading global bank, Citi had recently suggested the flagship crypto-asset could “become the currency of choice for international trade,” thanks to its “decentralized design, lack of foreign exchange exposure, fast (and potentially cheaper) money movements, secure payment channels, and traceability.”

Crypto experts also argue that such strong demand in the Bitcoin market is largely attributed to the fact institutions are coming.

The market liquidity is tightening at the flagship Crypto market, as there are less than 4 million BTCs in circulation available for upcoming investors including the likes of Grayscale, Paypal, Microstrategy, hedge funds, MicroStrategy Inc.’s Michael Saylor purchased more Bitcoin to raise the enterprise-software company’s holdings to more than $4 billion.

READ: British hedge fund earns £540 million from selling half of its Bitcoin holdings

Recent reports reveal that MicroStrategy Inc. recently bought more Bitcoin to raise the enterprise-software firm’s holdings to more than $4.3 billion.

It’s critical to note that just 21 million Bitcoins are ever going to be produced in total, and presently, there is about 18.9 million Bitcoin in circulation.

This shows a differential of about 2.1 million Bitcoin that are left to be produced, not forgetting about 4.5 million Bitcoins that have already been lost forever.

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This also means that liquidity is drying up, with a growing demand for Bitcoin increasing, the price would most likely stay north.

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Cryptocurrency

$119 billion valued investment bank, Goldman Sachs starts Bitcoin trading

Goldman Sachs Group Inc has begun a crypto trading desk that would be handling bitcoin futures and non-deliverable forwards on behalf of its customers.

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Goldman Sachs

The world’s leading investment bank, Goldman Sachs Group Inc, has begun a crypto trading desk that will be handling bitcoin futures and non-deliverable forwards on behalf of its customers.

In a report credited to Reuters, it was revealed that the elite investment team will be positioned under the U.S. bank’s Global Markets division.

The desk is part of the investment bank’s fast-growing crypto-assets sector, which also includes projects involving central bank digital currencies and blockchain technology.

Goldman Sachs is also exploring the creation of a bitcoin exchange-traded fund and has issued a request for information to explore such a crypto service.

READ: Dubai-based hedge fund plans to sell $750 million worth of Bitcoin for Cardano and Polkadot

What you should know: The $119 billion valued investment bank is one of the world’s most elite investment bank, headquartered in New York and known to offer a broad range of financial services across investment trading, banking, securities, and lately consumer banking to a large and diversified client base.

This comes as no surprise, as highly respected business leader, Michael Saylor had earlier revealed that top representatives from about 7,000 companies attended MicroStrategy’s recent Bitcoin seminar, which the leading business intelligence company organized to aid companies interested in buying Bitcoin as a treasury asset.

“We had people from SpaceX there. We had people [from] some of Elon Musk’s companies. We had people from Marathon there.

“The ones you would expect were there, but of course, there’s an avalanche of private companies, and there were a decent number of public companies and treasurers and CFOs that were lurking.

“Some don’t want to have their names mentioned, as you can imagine, because it’s a sensitive topic,” Saylor said.

READ: The odds against Bitcoin- Goldman Sachs

However, a significant number of traditional finance experts are not buying into the flagship crypto’s bullish run, as they see little value in the digital currency on the account that they believe Bitcoin, and other leading cryptos are just part of a larger speculative bubble.

At press time, Bitcoin traded at $49,026.27 with a daily trading volume of $54.6 Billion. Bitcoin is up 5.52% for the day.

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