Emefiele defends Cryptocurrency ban before Senate

The Governor, Central Bank of Nigeria (CBN), Godwin Emefiele says the Bank’s decision to prohibit deposit money banks, non-banking institutions and Other Financial Institutions from facilitating trading and dealings in cryptocurrency is in the best interest of Nigerian depositors and the country’s financial system.

Emefiele made the declaration on Tuesday, February 23, 2021, while briefing a joint Senate Committee on Banking, Insurance and Other Financial Institutions; ICT and Cybercrime; and Capital Market, on its directive to institutions under its regulation.

Describing the operations of cryptocurrencies as dangerous and opaque, the CBN Governor said the use of cryptocurrency contravened an existing law. He said given the fact that cryptocurrencies were issued by unregulated and unlicensed entities made it contrary to the mandate of the Bank, as enshrined in the CBN Act (2007) declaring the Bank as the issuer of legal tender in Nigeria.

Emefiele, who also differentiated between digital currencies, which Central Banks can issue and cryptocurrencies issued by unknown and unregulated entities, stressed that the anonymity, obscurity and concealment of cryptocurrencies made it suitable for those who indulge in illegal activities such as money laundering, terrorism financing, purchase of small arms and light weapons and tax evasion.

Citing instances of investigated criminal activities that had been linked to cryptocurrencies, he stated that the legitimacy of money and the safety of Nigeria’s financial system was central to the mandate of the CBN, even as he declared that “Cryptocurrency is not legitimate money” because it is not created or backed by any Central Bank.

“Cryptocurrency has no place in our monetary system at this time and cryptocurrency transactions should not be carried out through the Nigerian banking system,” he added.

Emefiele also emphasized that the Bank’s actions were not in any way, shape or form inimical to the development of FinTech or a technology-driven payment system. On the contrary, he noted that the Nigerian payment system had evolved significantly over the past decade, surpassing those of many of its counterparts in emerging, frontier and advanced economies boosted by reforms driven by the CBN.

While urging that the issue of cryptocurrency be treated with caution, the CBN Governor assured that the Bank would continue its surveillance and deeper understanding of the digital space, stressing that the ultimate goal of the CBN was to do all within its regulatory powers to educate Nigerians on emerging financial risks and protect our financial system from the activities of currency speculators, money launderers, and international fraudsters.

Also speaking, the Director-General of the Securities and Exchange Commission (SEC), Lamido Yuguda clarified that there was no policy contradiction between the CBN directive and the pronouncements made by the SEC on the subject of cryptocurrencies in Nigeria. He explained that the SEC made its pronouncement at the time to provide regulatory certainty within the digital asset space due to the growing volume of reported flaws.

Prior to the CBN directive, he said the SEC had, in 2017, cautioned the public on the risks involved in investing in digital and cryptocurrency, adding that the CBN, Nigeria Deposit Insurance Corporation (NDIC) and the SEC between 2018 and 2020 had also issued warnings on the lack of protection in investments in cryptocurrency.

Yuguda further disclosed that following the CBN directive, the SEC had put on hold the admittance of all persons affected by CBN circular into its proposed regulatory incubatory framework in order to ensure that only operators that are in full compliance with extant laws and regulations are admitted into the framework for regulating digital assets.

Similarly, the Chairman of the Independent Corrupt Practices and Other Related Offences Commission (ICPC), Bolaji Owasanoye highlighted the risks inherent in investing in virtual assets and cryptocurrencies in Nigeria.

He explained that cryptocurrencies posed serious legal and law enforcement risks for Nigeria due to its opaque nature and illicit financial flows, adding that the current move by the Federal Government to link National Identification Numbers with SIM cards attested to the fact that terrorists, kidnappers, bandits and perpetrators in illegal acts had relied on the shield provided by anonymity to commit heinous crimes.

Earlier in his welcome remarks, the Chairman of the Joint Senate Committee, and Chairman, Senate Committee on Banking, Insurance and Other Financial Institutions, Senator Uba Sani, said the committee was on a fact-finding mission and had no preemptive recommendation or stand and would make its position known only after it had reviewed the submissions made by stakeholders.