CBN ‘has no comfort in cryptocurrencies,’ says ban not new

[By VICTOR NZE]

Central Bank of Nigeria (CBN) has said the restriction placed on financial institutions trading in cryptocurrencies in the country is not a new one, adding further that it had on previous occasions warned operators to desist from it.

Godwin Emefiele, Governor of Central Bank of Nigeria,

According to the CBN, the clarification had become necessary following the trail of sentiments expressed  by the general public on the heels of the bank’s ‘reminder  to  Deposit  Money  Banks  (DMBs)  to  desist  from transacting in / and with entities dealing in cryptocurrencies.’

A statement by the CBN’s Acting Director, Corporate Communications, Osita Nwanisobi, weekend, said the regulatory institution had in two earlier circulars to deposit organizations in the country warned against transactions in cryptocurrencies.

“As regards our recent policy pronouncement,  it is important to clarify that the CBN circular of  February 5, 2021  did  not  place  any  new  restrictions  on  cryptocurrencies,  given  that  all banks in the country had earlier been forbidden, through CBN’s circular dated January 12, 2017, not to use, hold, trade and/or transact in cryptocurrencies .

“Indeed, this position was reiterated in another CBN Press Release dated February 27, 2018. It is also important to note that the CBN’s position on cryptocurrencies  is not an outlier as many countries, central banks, international financial institutions, and distinguished investors and   economists   have   also   warned   against   its   use.   They   have   all   made   similar pronouncements based of the significant risks that transacting in cryptocurrencies portend-risk  of  loss  of  investments,  money  laundering,  terrorism  financing,  illicit  fund  flows  and criminal  activities,” the statement read.

The CBN also cited other countries where the transaction is illegal to buttress its position.

“China,  Canada,  Taiwan,  Indonesia,  Algeria,  Egypt,  Morocco,  Bolivia, Kyrgyzstan, Ecuador, Saudi Arabia, Jordan, Iran, Bangladesh, Nepal and Cambodia have all placed  certain  level  of  restrictions  on  financial  institutions  facilitating  cryptocurrency transactions,” it said.

Further explaining the rationale for the restriction on cryptocurrency transactions by banks, the CBN said it was aimed at protecting ‘the  financial  system  and  the generality  of  Nigerians  (including  the  youth  population)  from  the  risks  inherent  in  crypto assets transactions, which have escalated in recent times, with dire consequences for the integrity of the financial system and financial stability.’

“Due to the fact that cryptocurrencies are  largely  speculative,  anonymous  and  untraceable  they  are  increasingly  being  used  for money  laundering,  terrorism  financing  and  other  criminal  activities.  Small retail and unsophisticated investors also face high probability of loss due to the high volatility of the investments in recent times. 

“In light of these realities and analyses, the CBN has no comfort in cryptocurrencies at this time and will continue to do all within its regulatory powers to educate Nigerians to desist from its use and protect our financial system from activities of fraudsters and speculators,” the apex bank stated.

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