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Home Business News Business

Why the CBN wielded the big stick on cryptocurrency transactions

Chike Olisah by Chike Olisah
February 7, 2021
in Business, Cryptos, Spotlight
CBN to restrict foreign exchange on more food imports
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The reasons the Central Bank of Nigeria (CBN) decided to ban trading on cryptocurrency in the country seems to be getting clearer.

The apex bank had warned local financial institutions against having any transactions in crypto or facilitating payments in cryptocurrency exchanges.

According to a report from Thisday, the Federal Government and the CBN were warned by the United States’ Federal Bureau of Investigation, (FBI), on the activities of fraudsters using cryptocurrencies to illegally bring in funds running into hundreds of millions of US dollars from US and other western economies into the country.

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Their activities were said to have particularly targeted at Covid-19 stimulus packages designed to cushion the impact of lockdown measures on businesses and working families in these countries.

The President of the European Central Bank, Christine Lagarde, had, last week Wednesday said that trading in bitcoin had led to some reprehensible activities, which includes money laundering.

Lagarde, in an interview at a Reuters online event, said of bitcoin, “It’s a highly speculative asset that has led to some reprehensible activity, including money laundering, and any loopholes need to be closed. There has to be regulation. This has to be applied and agreed upon at a global level because if there is an escape that escape will be used.’’

READ: Over 50% of Crypto exchanges have weak or porous KYC checks

What the investigation is saying

The report from Thisday says that FBI had discovered that fraudsters from Nigeria, popularly known as yahoo boys, took control of large chunk of funds released as stimulus in the wake of the devastating impact of the coronavirus pandemic, which has put many Americans out of jobs.

The fraudsters had been sending millions of dollars to Nigeria through cryptocurrencies in order to avoid any form of detection, thereby making it difficult for authorities in both US and Nigeria to trace such illicit funds.

The CBN decided to effect the ban on cryptocurrency trading before such funds will be used to destabilize the Nigerian economy. This is as Nigeria is said to have become the second country in the world with the biggest cryptocurrency transactions in the last 6 months.

Reports from highly placed sources within the presidency revealed that these fraudsters remitted between $200 and $300 million to Nigeria every week, using cryptocurrencies, just as intelligence reports indicated that kidnappers had switched to bitcoin for ransom payments, making it increasingly difficult to trace.

This compounded by FBI investigations which showed that Nigeria did not have the underlining economic base to justify such huge inflow of funds on a weekly basis.

READ: Bitcoin: The good, the bad, the future

What you should know

  • Nairametrics had earlier reported that the CBN on Friday warned the Deposit Money Banks, Non-Financial Institutions and other Financial Institutions against doing business in crypto and other digital assets.
  • The apex bank directed the financial institutions to immediately close the accounts of such persons or entities transacting in or operating cryptocurrency exchanges, warning of severe regulatory sanctions in the event of any breach of the directive.
  • This latest directive is coming after the CBN had in 2018 stated that cryptocurrencies are not a legal tender and as such are illegal.
  • The CBN action has provoked some reactions from Nigerians, many of whom have faulted the apex bank’s directive, saying that there is no logical reason to prohibit crypto enabled transactions and that it runs contrary to the present administration’s promise to lift 100 million Nigerians out of poverty.
  • They said this will discourage investment in Nigeria, especially in a fintech startup as it could be reversed at any time.
  • Former Vice President, Alhaji Atiku Abubakar, in a statement, advised the CBN to reverse the decision, arguing that the country couldn’t close her economy at this time as this is definitely the wrong time to introduce policies that will restrict the inflow of capital into Nigeria.

A cryptocurrency (or crypto) is a digital unregulated currency that could be used to buy goods and services but uses an online ledger with strong cryptography to secure online transactions.

Much of the interest in the currency, not backed by any government, is to trade for profit, with speculators at times driving prices skyward.


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Tags: Business NewsCBNCryptocurrencyNigeria News
Chike Olisah

Chike Olisah

Chike was a banker with over 11 years experience in retail and commercial banking, risk management, treasury portfolio management and relationship management. He also acquired some experience in financial management and do have some special interest in investment analysis and personal finance. He had stints with financial institutions like the former Intercontinental Bank and Fidelity Bank.

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Comments 7

  1. Dapo says:
    February 7, 2021 at 2:28 pm

    Hi Chike,

    Why are you ascribing this in the article that: “The CBN decided to effect the ban on cryptocurrency trading”?

    I think what the CBN did is to instruct Banks to close accounts of cryptocurrency exchanges or any entity that facilitates such transactions. This is different from saying the regulator ban cryptocurrency trading.

    Let’s be spot on and precise.

    Reply
  2. Dips says:
    February 7, 2021 at 2:33 pm

    They are so full of shit

    Reply
  3. Smiling avocado says:
    February 7, 2021 at 2:44 pm

    I don’t think this reason is true. If it was, they would shutdown exchanges much earlier, we didn’t just hear about the stimulus scandal, the news broke months ago.

    As for Lagarde’s comments, all these major banks have been laundering money for drug dealers, cartels (HSBC and co), also manipulating markets (JP Morgan and co). Lagarde herself was involved in a scandal involving 400 million dollars, the IMF and France before she was appointed as head of ECB. They can’t control Bitcoin that’s why they are talking like this. Bitcoin is an escape (her words), from this Ponzi fiat system.

    It has to be linked to the End SARS protest because in September the SEC designated cryptos as securities and regulation was being drafted in regards to cryptocurrency. In October, we had the protest and they couldn’t shutdown people donating via bitcoin.

    If it was money laundering or foreign exchange reserve related, they would have shut it down back then in August or so when banks were restricting dollars going out of the country. Just my 2 cents.

    Reply
  4. IBRAHIM Suleiman Ahmadu says:
    February 7, 2021 at 7:56 pm

    They claim is FBI that warn them, but did their Nation ban anything? Talking about money laundering is the elite who do that. They don’t want us to grow always oppressing the poor youths.

    Reply
  5. Kesiye says:
    February 8, 2021 at 3:38 am

    Anything that would lift the people of this country and particularly youths out of poverty is a threat to government because that would mean politics as it is being practiced would come to an end, even militancy too. It is poverty that has dragged majority of them to be used as militants. Policies of all governments of Nigeria have been lip service. No impact on the populace. Crypto trading is doing what they’re against which is alleviation of poverty and they’re afraid. Money laundering indeed. Who does money laundering that they’re using as excuse? No be Dem?

    Reply
  6. Kesiye says:
    February 8, 2021 at 4:03 am

    Does this ban stop crypto currency traders from using dollars instead of naira? There must be a way out for the youths of this country. The strangulation is too much. No jobs, no capital to do business, no regular power. They fill unending forms promising funds with nothing at the end.
    Now they try to survive with crypto currency trading, you ban it. Pls any government that bans your source of income vote them out come 2023. I’m sick and tired of this country with their wicked policies

    Reply
  7. Kesiye says:
    February 8, 2021 at 4:12 am

    Whether my comments are posted or not makes no difference. Group Dynamics of crypto traders will see to it that come 2023 this ill move is corrected immediately.

    Reply

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