By Hammed J. Sulaiman
On the 5th of February, 2021, the Central Bank of Nigeria (CBN) issued a circular to all banks and financial institutions. In the circular, the apex bank stated that trading with cryptocurrencies and facilitating payment for cryptocurrency exchanges is now prohibited. The apex bank also ordered all banks and other financial institutions to close accounts of individuals or organizations who continue to transact with cryptocurrencies.
However, as expected, the letter elicited widespread concern among the public, especially among the youth with many of them worried about the possible consequences the sanction will have on Nigeria’s emerging cryptocurrency sector and fintech innovation. And, in fact, some Nigerian banks closed their customers’ accounts retroactively without any prior notification or explanation.
The important question is: why would the CBN issue such a regulation when Nigeria has just become one of the biggest markets in the world for cryptocurrencies? This is yet another effort at making sure Nigerians do not attain financial freedom. Cryptocurrency exchange has shown many Nigerians why financial freedom is important, as they have discovered ways around the bureaucracies of traditional banking services and also a variety of other uses of the decentralized digital currencies, such as trading bitcoin for a living, among many other things.
The ban is an example of a one-sided battle between the “ruler” and “ruled”. It is clear that once Nigerian rulers are not benefitting from a system, they try to find a way either to regulate or ban it.
Ordinarily, people should have the discretion and liberty over what assets they invest in, especially, in Nigeria where the value of naira constantly depreciates with time. In fact, cryptocurrency traders, as an alternative, use bitcoin as a blockade against this perpetual inflation. Many Nigerians are known to use cryptocurrency trading to pay for their education and other basic amenities, and it is also responsible for thousands of new businesses and jobs.
The justifications for the prohibition of cryptocurrency transactions by CBN are archaic and retrogressive. According to their press release, cryptocurrencies are released by unregulated and unlicensed individuals, and as such, their use in Nigeria violated existing law because they are not legal tender, reiterating that anonymity and the absence of “Know Your Customer” (KYC) rendered them vulnerable to illicit uses such as money laundering and terrorism funding. All these are nonsense as CBN is not taking into cognizance that blockchain technology and cryptocurrencies seem to be the future of money and business, and that they connote freedom. Rather than a blanket ban, the government should rather look for ways to link identities of cryptocurrency users to their bank details in order to formalize the novel system.
And on its legality, Singapore, Hong Kong, the United States of America, Australia, Canada, and the European Union have accepted its usage. This is because the use of cryptocurrency has risen in popularity as a more flexible and faster payment method than the conventional financial frameworks. Nigeria should follow suit.
While defending their actions in a televised broadcast, CBN governor regarded trading cryptocurrency as “dangerous and opaque” but the fact remained that the directive is myopic because they are not mindful that the world is going digital, and people, especially, young Nigerians have already embraced fintech.
Hammed J. Sulaiman is a Writing Fellow at African Liberty and a student of law at Usmanu Danfodiyo University, Sokoto. He tweets via: sulexmighty_sbm
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