Reactions have continued to trail the decision of the Central Bank Of Nigeria (CBN) to prohibit and close all accounts transacting business in cryptocurrencies in the country.
Experts who spoke with The Daily Times on the development believed that the CBN’s ban is temporary and might be for the major purpose of affording the apex banking institution the time to run an in-depth study on virtual currency to come out with a regulatory framework and policies.
In an exclusive interaction with The Daily Times, a developmental economist and Chairman of the Board, Amaka Chiwuike-Uba Foundation (ACUF), Dr. Chiwuike Uba, said the CBN has access to data/information that is not available to the public and would have acted based on what it has.
However, it is important to communicate the reasons for the new directives to the public, he said.
“Unfortunately, it is very difficult to make any meaningful commentary on the CBN’s directives to banks to close all accounts transacting in cryptocurrencies, since the CBN gave no reason for the sudden volta-face in its directives/circular.
“This is so because in the circular of January 12, 2017, the CBN, while recognizing the dangers the virtual currency poses to the country given that crypto is unregulated, transferred the risk burden and choice to trade/transact to individuals and commercial banks.
“Obviously, the CBN has access to data/information that is not available to the public; and would have acted based on information that they have. Be that as it may, it is important to communicate the reasons for the new directives to the public.
“Having said that, outright and sudden banning of cryptocurrency transactions in Nigeria may not be a smart strategy, because crypto has come to stay in Nigeria.
“First, despite the ban, person to person (P2P) transactions would continue, through the circumvention of the Nigerian finance/currency space.
In this case, dealers on crypto will not withdraw straight into their account from their wallets. I believe the CBN’s ban is temporary and is to afford the regulatory institution the time to run an in-depth study on virtual currency, to come out with a regulatory framework and policies.
“The ban, however, may be the best option for the country in the face of arbitrariness and the havoc crypto has on Nigeria’s forex policy.
I would have recommended stakeholders’ consultations with the crypto market operations before the ban, thereby, giving them a chance to work out a smart, implementable, and sustainable plan with the CBN.
“While the temporary ban is commendable, it is important for the CBN to come out with the regulatory framework and/or policy on crypto, as quickly as possible to save the economy from cash flows, foreign direct investments, and job losses that may ensue from the ban.
“Outside the jobs and economic activities, virtual currency is creating, the country may be losing available funds for economic activities because most of the virtual currencies are domiciled in other countries.
Therefore, whereas the individual investors may be making some gains as a result of the yield on investment, Nigeria is starved of the money, which would have been invested in Nigeria.
“Certainly, investment in Nigeria may have a higher Return on Investment (RoI), while creating jobs. Also, stashing the money overseas and withdrawing the banks may put unnecessary pressure on Nigeria’s foreign reserve.
“These are in addition to the risk of government’s inability to trace the movement of the funds and security challenges posed by such transactions to the economy. Nigeria, therefore, needs a clear roadmap on virtual currency, without further delay. Banning is not enough,” he added.
Also, in an inquiry by The Daily Times, Nigeria’s first professor of the Capital Market and former Head of Department, Banking and Finance, Nasarawa State University, Uche Uwaleke, acknowledged that the decision by the CBN is not a unilateral agreement, stating that it should come together with the SEC to build up a swift regulatory framework for crypto asset trading in the country.
“Given the weighty nature of the directive, I want to believe that the CBN must have consulted relevant stakeholders including the Bankers Committee before taking the decision.
“I am inclined to believe that it was well thought through and not a unilateral decision. The fact is that what the CBN could see in a squatting position, many cannot see standing.
“So, I think the directive should be seen in the light of this fact that the CBN may have information which may not be available to the public.
“In my view, the flaw in that circular is that it did not state the reason why the apex Bank is taking that course of action. It should have done so especially if it’s to do with fraudulent activities and threats to financial system stability.
“I recall that not too long ago at some point, China, widely seen as the home of Cryptocurrencies, had to ban trading in bitcoins.
“I believe this measure is only temporary. Given that cryptos have come to stay, the CBN and the SEC should come up with a regulatory framework for crypto asset trading in Nigeria,” Prof. Uwaleke added.
Also speaking with The Daily Times, a stakeholder in cryptocurrency, Mr. Ibrahim Adjikpe, warned that the move by the CBN threatens crypto assets growth in the country in which the youths have invested a lot, urging that the federal government find a way to resolve the issue as soon as possible.
According to him: “Genuinely the crypto ban news by the Central Bank Of Nigeria was a great shock to many giving the importance and how Nigeria youths have strived hard to make the market grow so much and create means for many.
“It is very saddening that the Nigerian government made such the decision to threaten such growth and effort of the youths at this time of high unemployment rate and economic meltdown.
“Cryptocurrency is a global innovation and it’s a very bad decision for any government to ban cryptocurrency especially in developing countries and I hope the federal government somehow will still find a way to fix this.”
Meanwhile, despite the widespread criticism which greeted the CBN’s circular banning cryptocurrency operations in the country, the apex bank has vowed that it will continue to do all within its regulatory powers to educate Nigerians to desist from the use of cryptocurrencies.
According to CBN, it is determined to protect the country’s financial system from the activities of “fraudsters and speculators.”
Listing various reasons for its action, the central bank said not only are cryptocurrencies issued by unregulated and unlicensed entities, but the patrons and users also value “anonymity, obscurity, and concealment” and there are risks 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 a certain level of restrictions on financial institutions facilitating cryptocurrency transactions,” the apex said in the statement signed by Osita Nwanisobi, the acting Director, Corporate Communications Department.