The enforcement of the Central Bank of Nigeria‘s directive to financial institutions to stop cryptocurrency transactions will affect investors and operators in the country, currency experts and enthusiasts have said.
The regulator on Friday ordered Nigerian banks to close all cryptocurrency-related accounts. It has also barred financial institutions from facilitating cryptocurrency payments in the country.
In the letter, the CBN referenced a circular it issued on January 12, 2017, which cautioned Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs), and other financial institutions (OFIs) as well as members of the public on the risk associated with transactions of cryptocurrency.
In that memo issued in 2017, the bank had said digital currencies such as bitcoin, litecoin, and others are largely used in terrorism financing and money laundering since most transactions are executed virtually.
The regulator bank had also warned that such currencies are not accepted as legal tender in Nigeria.
Also, in February 2018, the CBN also cautioned Nigerians against investing in cryptocurrencies, noting that they would be unable to seek legal redress in the event of losses as they are not protected by the law.
“Further to earlier regulatory directives on the subject, the Bank hereby wishes to remind regulated institutions that dealing in cryptocurrencies or facilitating payments for cryptocurrency is prohibited,” the bank said in its latest statement to all regulated financial institutions in the country.
A financial analyst and senior banker, Olumide Balogun, said the CBN policy has been there for a while now and that the recent memo is just to reiterate its position on cryptocurrency.
He said the directive will have no effect on the financial institution since cryptocurrency had never been legally integrated into the country’s financial institutions.
“The Nigerian banking industry is one of the most resilient in the world, and it’s for a reason. The industry is regulated and every now and then, the regulators review happenings and make laws to protect the industry,” Mr Balogun said.
He said if Bitcoin is allowed, it will soon become a valuable asset, security, or collateral that banks can use to secure lending. He said that is when the “real manipulation” will begin.
He said Nigerians should not forget all the experiences of wonder banks, Mavrodi Mundial Money (MMM) Ponzi schemes, and the likes.
“In any case, the CBN has not prohibited trading in bitcoins in Nigeria, you can still do if you want. The CBN only prohibited the banks from facilitating the transactions,” Mr Balogun said.
Asked if cryptocurrency can be used for money laundering in Nigeria, he said: “The volumes being moved via the cryptocurrency is so huge these days and thus become a veritable medium for money laundering and funding terrorism. Until there is a way to regulate it, do not make it an official means of transferring value.”
“It is not our legal tender or a legal tender of any other nation for that matter, so may be CBN at the moment is not equipped to regulate an isolated item with no statutory issuer or underwriter anywhere,” he said.
Although he said he may not be aware of any instance where cryptocurrency had been used for money laundering, he said it is 100 per cent possible for that to happen.
“Again, the CBN is established by a sovereign nation with a recognised legal tender, the Naira. CBN is for now taking precautionary measures,” he added.
Iniobong Williams, a cryptocurrency enthusiast, said the people that will feel the brunt of the CBN policy are the cryptocurrency exchangers.
“People like Patricia, Binance, Luno, and all those big companies who are providing exchange services where you can pay naira to buy Bitcoin; so you will not have all those service providers anymore,” he said.
Mr Williams said a lot of people will not have the opportunity to invest in the market easily anymore, and that most of the players in the industry will have to stick to petty transactions or source their Bitcoins from other countries.
“It is going to be a bit difficult to buy cryptocurrency right now,” he said.
However, he said he does not think the CBN policy will have much effect on the cryptocurrency market.
“The cryptocurrency market is bigger than this,” he added.
Mr Williams said “the only challenge we will have is that we will find it hard to invest more money or buy some more coins in the market at our own will. So, we may have to source for coins. But I don’t think it will have a significant effect on the market.”
Luno, a cryptocurrency trading platform, in a statement on Friday, urged investors not to panic as their funds will be safe.
The platform asked crypto traders to exercise patience, and that “there’s no need to take any action regarding your account at this time”.
In the statement, Luno noted that naira depositing methods are currently affected on its platform and that deposits via PayU and Flutterwave are unavailable until further notice.
“Luno will continue to operate as normal while we seek further clarity from the authorities. Some Naira deposit methods are currently affected, please check the status page for updates. Withdrawals are unaffected and will continue to be processed, but may take longer than usual. All customer funds are completely safe,” the statement reads.
“There’s no need to take any action regarding your account at this time. We will update our customers on all incoming developments as soon as we receive further information, and certainly well in advance should withdrawals be affected,” the cryptocurrency platform explained.
Also, another cryptocurrency exchange platform, Binance, in a statement issued via its official Twitter page, said it is “monitoring the situation closely,” noting that funds on its platform remains safe, but that its Naira payment partners are suspending deposit services until further notice.
“Please note all your funds on Binance.com remain safe and crypto services on Binance.com will continue as normal. However, our NGN payment partners are suspending deposit services until further notice. From 7 PM (GMT*1) on Feb 5th 2021,” the statement reads.
“Binance will temporarily suspend NGN deposits through our fiat partner channels. Withdrawal services remain normal and will continue to be processed but might take slightly longer time than usual. We apologise for any inconvenience this may cause,” it concluded.
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