Re-echoing the cryptocurrency ban

Recently, the Central Bank of Nigeria (CBN) again ruffled feathers in the financial circle when it reminded all banks and other financial institutions that dealing in crypto currency and facilitating payment in it remain prohibited. It was the third time in about five years that the apex bank would be forcing a lid on the investment pit believed to be fraught with high risks.

Consequently, the banks have been deactivating such accounts across the nation. The Senate invited the Governor of the CBN, Godwin Emefiele, to brief it on the threats and opportunities of crypto currency on the nation’s economy. The latest is believed to have been informed by the fact that transactions in virtual currencies were largely untraceable and anonymous, thereby making them susceptible to abuse by criminals, in cases of money laundering and financing of terrorism.

In March 2018, the apex bank had cautioned to be wary of investments in crypto currency in order to avert a repeat of the Mavrodi Mundial Moneybox (MMM) bubble of 2017 which left millions of Nigerian families broken and devastated, while many businessmen lost all their capital in the phony scheme. The Nigerian Deposit Insurance Corporation (NDIC) had said that an estimated 3m lost N18bn in the MMM ponzi scheme between 2016 and 2017.

The CBN had emphasised that dealers and investors in any kind of cryptocurrency in Nigeria were not protected by law. It stated that cryptocurrencies such as bitcoin, ripples, monero, litecoin, dogecoin, onecoin and exchanges such as NairaEx were not licensed or regulated by the CBN, and were as such, not legal tenders in Nigeria. The CBN had, therefore, warned against investing in cryptocurrency as doing so would be at their own risk.

A cryptocurrency is a digital asset designed to work as a medium of exchange that uses cryptography (the art of writing and solving codes) to secure its transactions, control the creation of additional units, and to verify the transfer of assets.

Earlier in January 2017, the CBN had also issued a circular to banks and other financial institutions on virtual currency operations in Nigeria. It warned that virtual currencies were traded in exchange platforms that were unregulated all over the world.

Similarly, the Securities and Exchange Commission (SEC) had warned against investing in digital currencies such as Bitcoin, Swisscoin and OneCoin, stating that none of the individuals or companies promoting the use of the currencies was recognised by it or any other regulatory agency in Nigeria. The commission stressed the risks and possibilities of investors losing their money to such investments being promoted by these companies, including fraudulent pyramid schemes.

The NDIC, in conjunction with the CBN, had earlier set up a committee to study the trending digital currency, ‘Bitcoin’. According to the NDIC managing director, Umaru Ibrahim, the commission would look at the advantages and disadvantages of the currency and what it means for the payment systems in Nigeria as well as safety and of customers.

 “The ponzi scheme is the phenomenon of illegal fund managers, popularly called wonderbanks which have continued to defraud unsuspecting members of the public of their hard-earned money. This phenomenon has been a source of concern because despite our repeated warnings over the years, some members of the public have continued to fall victim of their fraudulent practices. We would like to reiterate the fact that these fund managers are illegal as they are neither licensed by the CBN to take deposits from members of the public nor are those who patronise them covered by the NDIC deposit insurance scheme,” the NDIC boss said.

Also, the Nigerian Senate weighed in at the time and deliberated on the widespread usage of digital currency, bitcoin, and ponzi schemes in Nigeria. In a motion entitled, “Urgent need to investigate the proliferation of Bitcoin, a form of crypto currency, to ascertain the worthiness of same as a form of investment in Nigeria”, the Senate stressed that not only had the proliferation of bitcoin become one of the best forms of investment in the country, it is also openly marketed across the country on the local television and radio stations, mostly to who are not aware of the consequences.

It is instructive that data from Local Bitcoins, a Bitcoin start-up company, showed that Nigeria came second in the world’s peer-to-peer (P2P) Bitcoin transactions in 2017, outpacing major European countries, the and the United States of America. This, undoubtedly, was traceable to the high rate in the country and its attendant get-rich-quick syndrome, which had gripped many Nigerians. 

, therefore, advises the CBN, NDIC, SEC and the National Orientation Agency (NOA) to step up their regulatory and public enlightenment functions in order to prevent gullible Nigerians from losing their hard-earned money again and again to schemes they could easily have avoided had they been properly advised by the .

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