By The Central Bank of Nigeria has offered a detailed explanation for its directive to Deposit Money Banks (DMBs) and other financial insitutions to close customer accounts used in trading cryptocurrencies and other related transactions.
It would be recalled that the apex bank, on December 5, gave the order, which has since been met with a number of criticisms from Nigerians.
In a press statement on Sunday issued by Osita Nwanisobi, Acting Director, Corporate Communications, the CBN said it deemed it necessary to provide justifications about its decision to the general public.
“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,” it stated.
The apex also said its position on cryptocurrencies was not exclusive to Nigeria, as many other 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. 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.”
The Nigerian leading financial regulator further explained that its actions were not inimical to the development of FinTech or alternative payment system in the country.
“To the contrary, the Nigerian payment system has evolved significantly over the last decade, leapfrogging many of its counterparts in emerging, frontier and advanced economies propelled by reforms driven by the CBN. This is evident from the variety of participants, products, channels, cutting-edge technology in the payments system.
“It is also validated by the astronomical growth of volume/value of transactions and the fact that Nigeria is an investment destination of choice for international financial technology companies because of CBN’s policies that have created an enabling investment environment in the payments system.
“Several other initiatives are being implemented to further support FinTech development and creation of jobs. These include regulatory sandbox and open banking principles that the Bank recently implemented.”
According to the CBN, the recent regulatory directive was necessitated by the need to protect the country’s financial system and generality of Nigerians from the inherent risks associated with crypto assets transactions.
“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 statement concluded.
Download the full statement below:
