The Central Bank of Nigeria (CBN) has opened investigations into bank accounts of companies involved in the trading of cryptocurrencies with the intention of blocking those with suspicious transactions and fraud.
The bank also rationalized its directive in a statement on Sunday by its Director of Communications, Mr. Osita Nwanisobi, that the restriction regime is to protect Nigerians and the financial system.
The former Head of Directorate of the Central Bank, Kingsley Moghalu, has said that $500 million worth of Bitcoin has been traded in Nigeria within the last five years.
Moghalu disclosed these figures while reacting to the recent CBN policy which directed all banks to close accounts that transact in cryptocurrency.
He faulted the move of the apex bank, saying that regardless of the risks involved in trading in cryptocurrencies, he would not recommend that it be banned outrightly.
“A lot of the activities in the world are going digital and I would not recommend banning it (cryptocurrencies) outright,” Moghalu said in a live broadcast on a private national tv station on Sunday.
“$500 million worth of Bitcoin has been traded in Nigeria within the last five years and Nigeria is one of the top 10 countries in the use of cryptocurrencies in the world today”.
He further explained that it is becoming a real factor in the country’s investment ecosystem, as well as a livelihood for many Nigerians.
The regulatory financial institution of Nigeria government on Friday slammed the ban through a circular which read: “The Central Bank of Nigeria circular of January 12, 2017, ref FPR/DIR/GEN/CIR/06/010 which cautioned Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs), other Financial Institutions and members of the public on the risk associated with transactions in cryptocurrency refers,” the statement said.
“Further to earlier regulatory directions on the subject, the bank hereby wishes to remind regulated institutions dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited.
The order directed all banks to close accounts of anyone who does transactions in cryptocurrency.
But, Moghalu faulted the directive and echoed the sentiments of many other Nigerians, noting that the move is seen as though the government is always taking actions aimed at taking away opportunities from Nigerians especially in a depressed economy.
He believes investment of any kind has risks and if he was in a position to make a decision, it would be to balance the risks as against the current realities of the country.
According to the former presidential candidate, regular currencies depreciate in value as against cryptocurrencies such as the BTC but many policies from the bank in the past few years have not been favourable.
“The Nigerian Government should try to make the investment climate far more friendly and efficient than it is now.
“It is unfriendly, that’s why the foreign investment is declining,” he said.
Former Vice President Atiku Abubakar has advised the Federal Government to have a rethink on its directive on cryptocurrency transactions in the country.
But Atiku stated that it was wrong to issue such a directive at this time, saying the number one challenge facing Nigeria was youth unemployment.
He explained that youth unemployment has already become not just a challenge but an emergency that has affected the nation’s economy and was exacerbating insecurity.
According to his statement on Saturday, what Nigeria presently needs are jobs and an opening up of its economy following the report that foreign capital inflow into the country is at a four-year low.
Atiku warned that introducing policies that would restrict the inflow of capital into Nigeria could harm its economy more and urge the government to revisit the policy to prohibit the dealing and transaction of cryptocurrencies.
He suggested that rather than an outright shutdown, the government could regulate the sub-sector and prevent any abuse that may be damaging to national security.
Bitcoin which started initially as open-source software in 2009 was in its early days the preserve of geeky amateur investors and worth near zero in value.
The virtual currency barreled to new highs to rise more than 400 percent over the past year, before promptly sliding some 20 percent and then settling around $36,000.
And as at today’s market rates, bloated by a surge in institutional demand, the digital unit’s market capitalisation is worth some $670 billion with myriad other crypto coins such as ethereum lifting the sector nominally close to the trillion mark.
But on the downside of transacting with crypto as taunted by the CBN, it is mainly the deep-pocketed investors that have suffered lost.
“Lost” does not mean the coins have fallen into lavatory and flushed away: it means they have been electronically zapped from the record, often because their owner has forgotten a password to coins hoarded on a USB stick.
One US developer mislaid his password after storing 7,002 bitcoins on one such flash drive, forcing him to wave goodbye, on paper (or rather, the trading screen), to around $280 million.
This volatility, as well as the unregulated and decentralised nature of the bitcoin beast, are key reasons why many seasoned financial observers are scared off as well as the risk of “losing” their stash.