The apex monetary authority in Africa’s most populous nation Nigeria, the Central Bank of Nigeria (CBN), has banned all banking relationships between cryptocurrency exchanges or service providers and banking institutions in the country. According to multiple local news sources, the CBN has directed all Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs), and Other Financial Institutions (OFIs) to close the bank accounts of cryptocurrency exchanges or service providers operating in the country.
The CBN Justifies Its Position to Outlaw Cryptocurrencies
The Central Bank of Nigeria in reaction to the many fusses its directive generated has come to state that crypto activities are dangerous to the financial system in the country. The CBN as reported by local news media The Punch said in a statement on Sunday that cryptocurrencies breed illegal activities and raise the financial risk.
The statement reads:
“The recent regulatory 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.”
The Central Bank of Nigeria went on to note:
“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.”
The claims have been seen by many people as anti-progressive with calls on the apex bank to revert the clampdown.
Response to Ban and the Way Forward
By far, many crypto activists have condemned the move by the CBN, whose positions clearly contradict that of the Securities and Exchange Commission who revealed its readiness to provide regulatory oversight on the emerging space.
Although the banking institutions have complied with the directive by closing all exchange’s cryptocurrency-related accounts, the crypto-savvy populace is still taking solace from the fact that the ban is currently not affecting P2P transactions on exchanges that have provisions for that prior to this time. Many public commentators are faulting the move, Kalu Aja, a financial planner and advisor, said:
“If Nigeria didn’t have GSM, and an entrepreneur introduced Mobile Banking to Nigeria…the banking regulators would have prohibited banking on mobile phones and other handheld devices because it’s been used to remit money without a bank-issued teller.”
Nigeria is the undisputed leader in cryptocurrency-related transactions in Africa with data showing the nation ranks high for P2P transactions on the global chart. The massive sway into the potentials of cryptocurrencies is owing to the flawed monetary policies of the CBN that continues to devalue the Nigerian Naira (NGN) while also limiting Dollar transactions.
The censorship is bound to be responded to by developing alternative ways to transact in cryptocurrencies, a scenario that will make the CBN’s effort almost futile.