The Central Bank of Nigeria sent a letter on Friday, 5 February to all deposit money banks (DMGs), non-financial institutions (NFIs) and other financial institutions (OFIs) in Nigeria, directing them to identify persons or entities transacting in cryptocurrencies or operating crypto exchanges within their systems and ensure that such accounts are closed immediately. The CBN further noted that any breach to this directive will attract severe regulatory sanctions to such institution.
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This news sent ripples into the crypto, blockchain and fintech industry in Nigeria and Africa at large. Many stakeholders and experts in the industry have commented on the directive including Changpeng Zhao Binance CEO, Oby Ezekwesili (Former World Bank CEO), Atiku Abuabakar, Chimezie Chuta (Founder and Coordinator of Blockchain Nigeria User Group), Nathaniel Luz and others. But each and every one of these individuals expressed their dismay and how ill-timed the directive is.
What could have prompted this directive? Let’s take a look at some possible reasons.
1. FBI warning:
According to Thisday, the Federal Bureau of Investigation (FBI) warned the CBN that fraudsters were using cryptocurrencies to bring millions of US Dollars illegally obtained through covid-19 stimulus packages from the USA and other western countries into Nigeria. Why didn’t the FBI ask the United States Securities and Exchange Commission (SEC) to ban crypto in America? Why do we always have to be at the receiving end when they ain’t doing their jobs properly?
2. 99% drop in remittance inflows into Nigeria:
A recently from Nairalytics clearly shows remittances sent to Nigeria through traditional mediums has declined steadily by over 99%. As at January 2020 remittance figures sent to Nigeria stood at $2.05 billion but by September 2020 it dropped drastically to $54.4 million. The leader of Dash cryptocurrency in Nigeria, Nathanial Luz told news.bitcoin.com “since many Nigerians are now switching to crypto-based remittance channels, the CBN is now fighting back with this latest directive,”.
Direct remittances into Nigeria declined by 97.3% between January & September 2020
Jan 2020 – $2.05bn
Feb 2020 – $1.02bn
Mar 2020 – $444.8m
Apr 2020 – $392.3m
May 2020 – $252.8m
Jun 2020 – $446.2m
Jul 2020 – $118.8m
Aug 2020 – $217.8m
Sep 2020 – $54.4m
— Nairalytics (@Nairalyticsdata) January 19, 2021
3. Government isn’t making cash from crypto transactions:
Outside being the apex financial institution in Nigeria. The Central Bank of Nigeria is a revenue generating agency of the Federal Government of Nigeria and as it stands the government hasn’t been making money from cryptocurrency in Nigeria. Those using cryptocurrencies for sending/receiving money, trading and remittances don’t pay any form of tax to the government. The government see the ban as a way of stamping its authority and making a statement that we are still in charge.
4. Lack of innovative drive to remain competitive in the 21st century:
The Central Bank of Nigeria lacks the innovative drive to remain competitive in this digital age where other countries central banks are developing their own central bank digital currencies (CBDCs). The ban on cryptocurrencies proves the CBN lags behind in regards innovative financial technology (Fintech) solutions. Someone needs to tell Godwin Emiefele, Bello Hassan, Musa I. Jimoh or whoever makes decisions in CBN that we are in digital dispensation, where money has been digitized and they can’t drag us back to the stone age with them. Bank notes and other traditional forms of money are becoming obsolete.
As a Nigerian and crypto enthusiast I see no reason to justify this ban on crypto for the following reasons:
- Crypto exchanges operating in Nigeria apply Know Your Customer (KYC) and Anti Money Laundering (AML) laws.
- Nigerian youths are not fraudsters
- People use the US Dollar and Naira to scam, can the CBN include them in the ban?
- Money has already gone digital and it’s too late to stop it
- What crypto needs is regulation and not a ban.