Cryptocurrency Ban: A Plus or a Minus?
The Central Bank of Nigeria has stated clearly that it does not approve the use of cryptocurrencies and has forbidden all banks in Nigeria not to use, hold, trade and/or transact in cryptocurrencies. The CBN stated this policy position in a circular dated January 12, 2017, that is 4 years ago. The bank re-stated this policy position a few days ago and it has generated considerable controversy.
What are Cryptocurrencies?
According to Investopedia.com, a cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers. A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.
The appealing features of cryptocurrencies are that they provide anonymity, security and room for tax evasion. These are the challenges the CBN wants to address.
Why did the CBN Place a Ban on the use of Cryptocurrencies?
In a circular released by the CBN on February 7, 2021, the apex bank stated that the anonymity, obscurity and concealment that cryptocurrencies provide are well suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion.
However, some Nigerians have accused the CBN of being a political tool in the hands of the Federal Government which is devising strategies to tackle a second #EndSars protest. There were reports of a sharp switch to the use of cryptocurrency after the bank accounts of the sponsors of the last #EndSars protest were frozen. Many now fear that the government wants to financially paralyze sponsors of the protest or any other organized move against the Buhari-led government.
Others have also accused the CBN of initiating policies and regulations that make it difficult for creative Nigerians to earn a decent living legally in Nigeria, especially those in the financial technology sector.
Bottom-line
The CBN fears that the use of cryptocurrencies keeps the regulators in the dark. They can’t track cryptocurrencies in and out of the country, making it difficult to track tax evaders, money launderers, terrorist groups or arms dealers.
However, according to CoinMarketCap the Market Capital of Bitcoin alone is over $855 billion dollars and Ethereum over $200 billion. Is this a market to abandon?
Nigeria is now the second-fastest-growing global marketplace for cryptocurrencies on Paxful, accounting for over 60,215 bitcoins, valued at more than $566 million which, apart from the US, is the largest volume worldwide on Paxful. This is just on Paxful. There are several other Peer-2-peer platforms that Nigerians use too.
Is the ban on cryptocurrencies indeed a plus to our economy or perhaps a minus?
