Social media platforms were abuzz Friday, as people reacted mostly angrily to a directive by the Central Bank of Nigeria (CBN) for deposit money banks, non-bank financial institutions, and other financial institutions to “identify persons and/or entities transacting in or operating cryptocurrency exchanges within their systems.
The circular jointly signed by Bello Hassan and Musa L. Jimoh, Directors of Banking Supervision, and Payment System Management departments of the CBN respectively, directed the various financial institutions to “ensure that such accounts are closed immediately.”
Recalling its circular of January 12, 2017, had warned on the public on the risk associated with transactions in crypto currency, the CBN reminded the regulated institutions that dealing in such currencies or facilitating payments for exchanges is prohibited.
Experts link the latest CBN move against crypto currency to its growing popularity in the country, making it the largest market outside of the U.S, a situation believed to have piled unhealthy pressure on the external reserves. Crypto currencies are traded in US$, following which investors rely heavily on the black market, thereby weakening the Naira significantly.
Recall also that the Securities & Exchange Commission (SEC), in September last year announced that all crypto assets fall under its regulatory purview.
Reacting, via his personal twitter handle, Zeal Akaraiwe, a fixed income market analyst, wonders if the apex bank has the legal powers to do what it did, or the nation is “witnessing and accepting a possible abuse of power.”
A report by Bloomberg equally links the CBN move to last October’s protest against Police brutality code-named: EndSARS to draw attention to excesses of the police’s Special Anti-Robbery Squad. Organizers were said to have been funded through Bitcoins after the government allegedly blocked local payment platforms for collecting donations.
Confirming this, said Joachim MacEbong, a senior analyst at SBM Intelligence in Lagos, told Bloomberg that “here’s a direct line that can be drawn from the EndSARS protests — which carried on partly with funding from cryptocurrency even though CBN restricted several accounts — to these latest regulations.”
Rather than kill the spirit of those engaged in it, he believes the “latest instruction will end up making the case for cryptocurrency adoption better than any other argument. One promises freedom, while the status quo only reinforces restrictions.”
As if to confirm this, promoters of Bundle, “a social payments app for cash or cryptocurrency Money with wings” in Nigeria and Ghana, assured clients that “trading has not stopped and your assets remain as safe as ever.”
Continuing, Bundle said it is “monitoring the situation closely and we’ll share updates as we have them.”
Friday’s move may however not have come as a shock to those who recall the warning by Godwin Emefiele, CBN Governor in his goodwill message at a seminar themed: “Understanding the interface between crypto-currency and money laundering,” where he noted the need to nip Virtual Currencies in the bud, in view of the associated risks.
This, he told participants at the event organized by the Presidential Advisory Committee Against Corruption (PACAC), is necessary, “if the safety and soundness of the financial system are to be sustained.”
He also acknowledged the new and exciting opportunities, as well as challenges of crypto currencies to the financial system and its regulators, who are now addressing some of them with a variety of approaches.
To mitigate effects of these challenges, Emefiele said the apex bank constituted an inter-agency committee on VCs comprising regulators and law enforcement agencies to study the subject. This was besides committing resources to capacity building of staff; and following up with warning the public through notices, the first of which was issued in February 2017. There was also a circular to banks and other financial institutions on the need to ensure their existing customers engaged in VC exchanges have effective AML/CTF (Anti-Money Laundering/Combating Financial Terrorism) monitoring controls.
