April 22, 2021

Why CBN Banned against cryptocurrency transactions

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Cryptocurrency or digital currencies trading is not backed by the Central Bank of Nigeria (CBN) Act which recognizes the naira as only generally acceptable currency in the Nigerian financial system, an analyst has said.

Recall that The Central Bank of Nigeria had on Friday, ordered Deposit Money Banks (DMBs), Other Financial Institutions (OFIs) and Non-Bank Financial Institutions (NBFIs) local financial institutions to close accounts transacting crypto currencies in the country.

Also Read: CBN Orders Banks To Close All Accounts Transacting In Cryptocurrency 

While a member of the Monetary Policy Committee (MPC) said on Saturday that the apex bank never prevented any individual from dealing in cryptocurrency, noting that what the apex bank said was deposit money banks under its purview cannot partake in cryptocurrency because it will be illegal, the NATION reports.

The MPC member, who spoke anonymously, explained that crypto trading would undermine monetary policy which is anchored on Naira money supply and demand.

“CBN is also concerned that bitcoin valuation is excessively speculative, akin to betting, and it will not make sense to run a currency system based gambling,” he said.

He continued, and added, “Why people will come charging on CBN Governor Godwin Emiefele over banning banks from digital currencies is inexplicable. Bitcoin and other variants of digital currencies are not only unregulated the world over, but they are now used as weapons by cyber criminals.”

The MPC member said the last time cyber criminals hacked the customer data base of one of Nigerian banks, they requested ransoms in bitcoin before they released the database.

“And since bitcoin addresses are psedonymous, it is not possible to trace them. The CBN cannot fold its arms and see cryptocurrency destroy the entire banking system with all the unsavoury consequences of banking crisis and bailouts. Turkey had also banned bitcoin because it was becoming a channel for money laundering on an unimaginable scale,” he said.

“So, if any Nigerian wants to deal in digital currencies, bitcoin, or whatever, such person is free to do so, only that there is no platform for a cryptocurrency payment system. Accordingly, such a person could as well go to wherever such platform is legalised since the bitcoin market is virtual 24/7,” he said.

In a letter forwarded to all DMBs, OFIs and NBFIs, the regulator noted that “breaches of this directive will attract severe regulatory sanctions.”

The circular credited to the Director of Banking Supervision, Bello Hassan said:” The CBN circular of January 12, 2017 which warned DMBs, NBFIs and OFIs and members of the public on the risks associated with transactions in crypto currency refers”.

“Further to other regulatory directive on the subject, the bank hereby wishes to remind regulated institutions that dealing in crypto currencies or facilitating payment from cryptocurrency exchanges is prohibited.

“Accordingly, or DMBs, OFIs, NBFIs, are advised to identify persons and /or entities transacting in or operating crypto currency exchanges within their system and ensure that such accounts are closed immediately.”

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