Despite growing criticisms of its decision on cryptocurrencies, the Central Bank of Nigeria (CBN) says it will continue to protect the financial system from the activities of fraudsters, and the instrument which it describes as a “gambling device”.
The apex bank, in a statement Sunday evening signed by its Acting Director of Corporate Communications, Osita Nwanisobi, brushed aside the advice by the former Vice President, Atiku Abubakar and others, restating its directive to banks to close accounts of persons or entities involved in cryptocurrencies.
The CBN’s insistence followed a circular issued January 12, 2017, and another press statement issued February 27, 2018, in which it forbade the banks not to use, hold, trade and/or transact in cryptocurrencies.
Cryptocurrencies, the apex bank says are issued by unregulated and unlicensed entities, while the patrons and users value “anonymity, obscurity, and concealment” with huge risks of “loss of investments, money laundering, terrorism financing, illicit fund flows and criminal activities”.
The bank cited China, Canada, Taiwan, Indonesia, Algeria, Egypt, Morocco, Bolivia, Kyrgyzstan, Ecuador, Saudi Arabia, Jordan, Iran, Bangladesh, Nepal and Cambodia as countries in addition to international financial institutions, and distinguished investors and economists that have warned against its use.
“They have all made similar pronouncements based on the significant risks that transacting in cryptocurrencies portend risk of loss of investments, money laundering, terrorism financing, illicit fund flows and criminal activities.
“”In China, for example, cryptocurrencies are completely banned and all exchanges closed as well. Banks and other financial institutions are not allowed by law to transact or deal with cryptocurrencies. China’s Central Bank called the Peoples Bank of China (PBoC) has provided several directives ruling out the use of these currencies. The PBOC views cryptocurrencies as illegal because they are not issued by any recognized monetary institution and do not hold any legal status that can make them equivalent to money. Hence banks and all stakeholders are strongly advised against their use as a currency”.
Nwanisobi supported the bank’s views with the fame investor Warren Buffett who described cryptocurrencies as “rat poison squared,” a “mirage,” and a “gambling device and also Andrew Bailey, the Governor of the Bank of England, who at a Davos-based World Economic Forum, highlighted the extreme price volatility of cryptocurrencies as one of the biggest flaw that makes it impossible for them to be used as a lasting means of payment.
“Have we landed on what I would call the design, governance and arrangements for what I might call a lasting digital currency? No, I don’t think we’re there yet, honestly. I don’t think cryptocurrencies as originally formulated are it,” he said.
The oppositions against cryptocurrencies are fuelled by the volatility of Bitcoin, the best-known cryptocurrency, which hit a record high of $42,000 per unit on January 8, 2021, and sank as low as $28,800 about two weeks later. This is far greater volatility than is found with normal currencies.
Cryptocurrencies’ use in Nigeria also goes against the key mandates of the CBN, as enshrined in the CBN Act (2007), as the issuer of legal tender in Nigeria and is seen In effect, as a direct contravention of existing law.
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