CBN directs all banks to close the accounts of all crypto currency exchanges in Nigeria – Agwu, C. J
In a swift policy action, the Central Bank of Nigeria today February 5th, directed all deposit money banks, non bank financial institutions and other financial institutions to immediately “identify persons and or entities transacting in or operating crypto currency exchanges within their systems and ensure that the accounts are closed immediately”.
The CBN reiterated its earlier stance that “dealing in crypto currencies or facilitating payments for crypto currency exchanges is prohibited”.
The Central Bank, in the circular dated February and addressed to all banks and other financial institutions warned that “any breaches of the above directive will attract severe regulatory sanctions”.
It will be recalled that most crypto currency dealings are based on speculations with no underlying transactions, thereby fueling pressure on the local currency. Besides, due to the nature of the transactions, cryptos can easily be used by criminals and terrorists and completely beat any traces and the entire financial system.
In an investigates report by Irene Ubani and published late last year in PlusTvAfrica, it was noted that “Nigeria needs a strong regulatory system to help stem the growing illicit transfer of millions of dollars by ‘criminals’, accused by experts of using cryptocurrency platforms to siphon cash out of the country “
The report further noted that “in the face of the impact of the global Covid-19 pandemic on the country’s economy – the naira had dropped by at least 28% at the time of writing – investors have sought safe havens to preserve the value of their investment as well as the fastest means for exit. But the virtual currency market has also attracted criminals, who have turned to the use of these digital assets to move funds unnoticed”.
In another report, Reuters observed that “monthly cryptocurrency transfers to and from Africa of under $10,000 – typically made by individuals and small businesses – jumped more than 55% in a year to reach $316 million in June, the data from U.S. blockchain research firm Chainalysis shows.
“The number of monthly transfers also rose by almost half, surpassing 600,700, according to Chainalysis, which says the research is the most comprehensive effort yet to map out global crypto use. Much of the activity took place in Nigeria, the continent’s biggest economy, along with South Africa and Kenya”, the report concludes.
Paxful, a leading peer-to-peer bitcoin marketplace, reports that Nigeria is now has the world’s second largest Bitcoin trading volume. Nigerians have traded 60,215 Bitcoins in the last five years, or more than $566 million USD.
Interestingly, all of the transactions in crypto goes without government regulation and thus the Federal Government and its agencies loses revenue and worst still, macro economic targeting becomes an issue as those transactions are not routed through the financial system.
With this latest severe measure by the Central Bank, it is expected that there may be some protests on social and online media as those affected will seek a reversal. The country currently have some of the big exchanges like Paxful operating here and many young ones have taken to crypto trading as full occupation and profession.