- J McGlynn and M Bacina
Central Bank of Nigeria: banks should not engage with digital currencies
Updated: Feb 15, 2021
The Central Bank of Nigeria (CBN) has issued a notice to local banking institutions that it does not permit "dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges” in one of the strongest anti-digital currency positions of a Central Bank.
The CBN has again directed attention to it's 2017 circular and that it still holds the same position it did four years ago: it will not recognise digital currencies as legal tender and will not approve any bank being involved due to "inherent risks". The 2017 paper repeats the same misguided and incorrect myths around the "opportunities" that digital currencies is said to create for illegal activities, such as money laundering and terrorism, when all evidence is that there is no greater illegal activity in digital currencies, and likely less, than in the use of physical cash or in banks at present.
The CBN has taken the liberty of ordering all banks to close any accounts transacting with digital currencies. It said:
all banks should identify persons and/or entities transacting with cryptocurrency or operating crypto exchanges on their platforms and ensure that such accounts are closed immediately.
Any breaches of the order would face severe regulatory sanctions
While this reminder apparently sent “shockwaves through social media”, the CBN then issued a statement to clarify that it was not imposing any new restrictions on the industry, emphasizing:
It is important to clarify that the CBN circular of Feb. 5, 2021, did not place any new restrictions on cryptocurrencies, given that all banks in the country had earlier been forbidden, through CBN’s circular dated Jan. 12, 2017, not to use, hold, trade and/or transact in cryptocurrencies.
As the use of digital currencies is only accelerating, the more suitable, long term solution would be for sensible regulation and education to address the perceived concerns.
Countries like Australia, Canada, and the Isle of Man for example, have already enacted laws to cover digital assets transactions and the institutions that facilitate within existing anti-money laundering and counter-terrorist financing laws.
Those familiar with the "Nigerian Prince Scam" might consider that efforts within that country could be better placed pursuing those who take advantage of international payment providers rather than seeking to ban wholesale innovative and entirely traceable digital currency systems, which are the very worst systems for criminals and money launderers to use if they wish to remain anonymous.