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.”
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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.
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“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.
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“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.”
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.
“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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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.
“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:
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…….
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
Funny that Nigeria ban crypto yet they are know world wide for email banking scams ? Seems it’s OK for traditional bank scams
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.
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.
Nigeria with new rules every time.
Will leave This country for una very soon
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?
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.
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
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!
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?
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
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.