The Central Bank of Nigeria (CBN), on Sunday, offered justifications for its move against cryptocurrency operators in the country, including its high volatility, non-regulation, and being in direct contravention of its enabling Act (2007), as an issuer of legal tender.

It noted in a statement by Osita Nwasinobi, its acting director, Corporate Communications, that “directive became necessary to protect 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.”

Given these realities and analyses, he said “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.”

By its name and nature, the statement said it is clear that the patrons and users of “cryptocurrencies” value anonymity, obscurity, and concealment, hence the question as to “why any entity would disguise its transactions if they were legal.

“It is on the basis of this opacity that cryptocurrencies have become well-suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion.”

Many banks and investors who highly value reputation, he noted, “have been turned off from cryptocurrencies because of the damaging effects of the widespread use of cryptocurrencies for illegal activities.”

Stressing the well known role of cryptocurrencies in the purchase of hard and illegal drugs on the darknet website called “Silk Road,” Nwasinobi recalled recent reports on the use of cryptocurrencies to “finance terror plots, further damaging its image as a legitimate means of exchange.”

Recent evidence, he continued, “now suggests that some cryptocurrencies have become more widely used as speculative assets rather than as means of payment, thus explaining the significant volatility and variability in their prices.

“Because the total number of Bitcoins that would ever be issued is fixed (only 21m will ever be created), new issuances are predetermined at a gradually decelerating pace,” a situation he said has created a perverse incentive that encourages users to stockpile them in the hope that their prices rise.

“Unfortunately, with a conglomeration of desperate, disparate, and unregulated actors comes unprecedented price volatility that has threatened many sophisticated financial systems.”

On the very volatile nature, the statement noted that the price of ether, one of the largest cryptocurrencies in the world, fell from US$320 to US$0.10 in June 2017, just as the price of Bitcoins has also suffered similar volatilities.

“Given that unlike Fiat Money which accompanied by full faith and comfort of a country or central bank, cryptocurrencies do not have any intrinsic value and do not generate returns by themselves.

“When one buys a stock, say of a conglomerate in the Nigeria Stock Exchange, its price reflects the activity and production of that conglomerate and the value people place on their goods and/or services. This price may rise as the conglomerate produces better goods/services and probably gains greater market share.

“The reverse would be true if the conglomerate does not innovate to improve the quality of its goods/services. In other words, the price of that stock reflects market fundamentals. In contrast, cryptocurrencies do not have fundamentals and would never have fundamentals. Investors only buy in the hope that its use and acceptability will rise, thereby pushing up its demand and price.”

Since new versions of cryptocurrencies come on stream with new mathematical models, an infinite supply may someday crash the price to zero, he warned, assuring that the CBN’s “actions are not in any way, shape or form inimical to the development of FinTech or a technology-driven payment system.

“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.

“These developments in the payments and settlements space have helped to grow the financial system, improving financial inclusion, the quality and convenience of financial services and has also created millions of direct and indirect jobs for teeming youth population.”

The innovations in Nigeria’s payment system, the apex bank continued, were catalyzed by its regulatory reforms “which entailed the issuance of a raft of guidelines and regulations on Operations of Electronic Payments Channels in Nigeria; Transaction Switching; Card Issuance and Usage, Licensing of payment service providers; Mobile Money Services, Electronic Payments of Salaries, Pensions, Suppliers and Taxes, Licensing Super Agents in Nigeria; and use of USSD for Financial Services in Nigeria, Super Agents and Agent Banking Operations and Payment Service Banks to mention a few.”

The robust regulatory framework put in place, it further noted, “opened up the payment system to innovation with several new players across in the following licensing categories- Payment Terminal Service Providers (PTSPs), Payment Solution Service Providers (PSSPs), Mobile Money Operators (MMOs), Payment Terminal Application Developers (PTSAs), Switches, Super Agents, Agents and Payment Service Banks (PSBs) This has created both direct and indirect jobs for Nigeria’s youth population.