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Cryptocurrency, bank accounts and CBN

As usual, the step taken by the Central Bank of Nigeria (CBN) to put an end to operation of cryptocurrency bank accounts in the country has raised dusts among a number of Nigerians, who feel highly opposed to the idea. Even while the apex bank, for weeks now, has tried to sustain its reasons for taking the decision, those on the other side still perceive it as being autocratic and selfdiscriminatory to current global order.

Without trying to be on the side of the Godwin Emefiele-led apex bank, facts must, however, be stated that even though cryptocurrencies have become the vogue globally, Nigeria always has its negative peculiarities when initiatives like this are introduced. Before now, precisely about four years ago, the Nigerian Deposit Insurance Corporation (NDIC) had also sounded a note of warning on the implication of blindly embracing the digital currencies without thinking it through.

For those seeing it from the angle of self-denial from global technological evolution, the NDIC, which today bears the responsibility of insuring all bank deposits, had seen it differently, and subsequently gave a very strong warning to those allured by the high gains promised by promoters of digital currencies, as they are merely meddling with uncertainty.

Short from describing the process as outright gambling, the fact remains that while deposit value of the naira and other major currencies can be ascertained, the value of the digital currencies, which are now in about 500 versions, cannot be ascertained, as well as what influences its value.

On the list as of today are digital dough like Bitcoin, Ripples, Monero, Litecoin, Dogecoin, Onecoin, and lot more, with more still likely to emerge as those behind it deem fit to project. Cryptocurrency trading is so pervasive and widespread that every segment and all operators in the financial industry are becoming vulnerable to their operations that are not guided by regulation.

The same reason many financial sector regulators, prominent financial institutions including global banks, and investment firms are moving swiftly against it. For the CBN that has been doing everything to defend the naira against other major currencies, as well as check money laundering, there is no better way to go about its business in containing those monsters than coming strong on a development that appears to give room for such fraud to thrive. Apart from digital currency use not being licensed in the country, its application and deployment in the last few years had widened the ground for cyber criminals to have a field day. For those critical of CBN’s action, even the United Kingdombased Financial Conduct Authority (FCA) and Action Fraud had also warned the public to be wary of investment scams carried out via such bogus platforms.

This warning came as cryptoassests (crypto) and forex investment scams reports more than tripled last year to over 1,800. Fraudsters promise high returns from investments in crypto and forex, with victims losing over £27 million in total in 2018/19. Moreover, cryptocurrencies stolen from exchanges and scammed from investors surged more than 400 per cent in 2018 to around $1.7 billion The danger with digital currency is that although like traditional money (such as banknotes), they can be used to buy physical goods and services, private digital currencies combine new payments systems with new currencies that are not issued by any central bank, popularly among them Bitcoin, including LiteCoin, Ethereum and Ripple.

The fact that such digital currencies are largely untraceable and anonymous makes them susceptible to abuse by criminals, especially in money laundering and financing of terrorism, and those who patronise it may lose their money without any legal redress in the event the promoters close business or the scheme collapses.

Ironically, this is the very reason why cryptocurrencies exist in the first place, to stop any regulator and third party from getting in between transfers from one person to another. Succinctly put, CBN’s action should not be seen as an attempt to muscle everyone under its authority, even though it has the power to do so as far as financial dealings are concerned. Elsewhere, authorities and central banks are closely monitoring developments in digital currencies and studying their implications for the financial system and the economy.

This is what should be on the top card for Nigerians at this moment that criminals are cutting corners and even legally devising means to elevate money laundering. We believe the regulator acted fast to curtail an emerging dangerous trend capable of eroding Nigeria’s Anti-Money Laundering and Counter-Terrorist Financing (AML/CFT) gains. It should be known that before placing a ban on financial dealings that do not conform with the norm, the regulator must have gotten a financial intelligence on such operations, as seen in kidnappers now collecting Bitcoin for ransom.

Although moving fast with seemingly blind global acceptance, the new changing order towards cryptocurrency trading in Nigeria is not in tandem with Nigeria’s AML/CFT compliance structure as the country battles to move out of the Financial Action Task Force (FATF) sanctions list. We believe those opposed to the action of the apex bank know that regulating a process as they are suggesting should not happen while it is already going out of hands. The best option is to cut it short and develop a regulatory mechanism that fits into the system.

While not encouraging the apex bank to lock the country out completely from any gainful revolution, we, however, advise that caution should be applied as it is rightly doing in this case, in order to forestall a further dip on the economy and a bad image for the country.

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