On February 5, 2021, the director of the Central Bank of Nigeria (CBN) released a statement reminding local financial institutions that the use and trade of cryptocurrencies remain prohibited in the country. The bank ordered all accounts involved in cryptocurrency exchanges be closed to avoid sanctions.
CBN asserted this ban is anchored on a circular that had been previously released in 2017, which pointed out that Bitcoin and other cryptocurrencies are not legal tenders in Nigeria.
The institution also stated that the anonymity cryptocurrencies provide in transactions, as well as the lack of regulation and redress in case the market collapses, make it vulnerable to exploitation.
In response to this, Binance, along with other local electronic payments firms such as Bundle, stopped processing deposits in Nigeria’s fiat currency for the meantime.
Crypto users in Nigeria took to various social media platforms to express their opposition towards the ban. However, many experts believe the events are temporary and would not affect the country’s crypto market.
Tosin Olugbenga, a software and blockchain engineer in Nigeria, stated that the government order may be rooted in the expanding reach of cryptocurrency in the Nigerian market and the price hike of Bitcoin in 2020.
‘They’re moving money from naira to crypto. That is what the CBN sees and has taken issue with. It is not banning crypto trading. It’s just telling financial institutions not to allow their platforms to be used to buy or sell crypto on exchanges like Binance,’ Olugbenga stated.
When the orders were met with adverse reactions from the public, the CBN released another statement two days later clarifying the previous announcement was simply a reiteration of an already established regulation.
‘It is important to clarify that the CBN circular of February 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 January 12, 2017, not to use, hold, trade and/or transact in cryptocurrencies,’ the CBN’s statement indicated on February 7.
Acting Director of Corporate Communications of CBN Osita Nwanisoba compared the country’s situation with those of other countries that have similarly banned their banks from using or selling cryptocurrencies, including China.
However, instead of banning cryptocurrency altogether, China has simply put up limitations on its use and exchange.
‘Due to the fact that cryptocurrencies are largely speculative, anonymous and untraceable they are increasingly being used for money laundering, terrorism financing and other criminal activities,’ the February 7 statement declared, signed by Acting Director Nwanisoba.
As of now, there has been no official statement by the CBN explaining the motivations behind the orders.
‘In light of these realities and analyses, the CBN has no comfort in cryptocurrencies at this time. It will continue to do all within its regulatory powers to educate Nigerians to desist from its use and protect our financial system from activities of fraudsters and speculators,’ the institution declared.
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