Following the issuance of a circular by the Central Bank of Nigeria (CBN) on Friday, February 5, 2021, reiterating an earlier directive prohibiting commercial banks and other financial institutions from facilitating payment for cryptocurrency transactions, sources close to the financial regulator say the latest move may not be unconnected to the activities of a cyber-criminal cartel that recently hijacked the data of one of the banks and demanded ransoms in bitcoins.
According to a source, who noted that the CBN was not against the use of cryptocurrencies and had not banned any individual from using it, the regulator would be failing in its responsibilities if it allowed unregulated actors to use the platforms of institutions it regulates to facilitate illegal transactions.
The source, who pleaded anonymity, further noted that the CBN, like many other major central banks around the globe, were cautious about the use of bitcoins in their respective economies because of the threats its usage posed to their financial systems.
According to him, the concerns of the central banks prompted them to float the idea of issuing digital currencies, which would allow holders to make payments via the internet and offline, in a direct move to fend off threats of other existing means of electronic payment such as digital wallets, online banks or cryptocurrencies, which are risk-prone due to their speculative nature.
Citing the proposed e-krona by the Riksbank of Sweden and advanced moves already made by the Peoples’ Bank of China (PBoC) to issue a digital currency as well as consultations by the European Central Bank and the Bank of England on the issue of digital currencies, our source said the concern of the CBN was valid and supported by all.
While noting that no central bank in the world would seat back and not address threats to the financial system it regulates, the source said investigations revealed that cryptocurrencies had been used for laundering illicit funds, defrauding unsuspecting investors, scams and monetizing ransomware as was the case with the unnamed commercial bank in Nigeria.
He therefore reiterated the need for Nigerians to be cautious in transacting in cryptocurrencies since they were highly volatile and not regulated by any central bank in the world nor insured by the government of any major economy.
Moreover, while noting that the Naira remained the only legal tender recognized in the Nigerian financial system by the CBN Act (2007), as amended, he said allowing crypto currency traders, who were unregulated, to continue to utilize the platforms of institutions regulated by the CBN would be tantamount to the Bank abdicating its regulatory role of ensuring monetary and price stability as well as promoting a sound financial system.
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