With no shift in ground on the decision by the Central Bank of Nigeria (CBN) to banning cryptocurreny in Nigeria, financial institutions have started implementing the directive to close up all accounts related to the digital currency.
In a mail to its customers titled “Mandatory Closure of Cryptocurrency related accounts”, Ecobank Nigeria advised them: “You will be aware of the recent directive by the Central Bank of Nigeria that dealing in Cryptocurrency or facilitating payments for cryptocurrency exchange is prohibited.
This followed earlier communication by the regulators expressing concerns about virtual currencies.
The Central Bank of Nigeria (CBN) has directed that all banks, non-bank financial institutions and other financial institutions should identify persons and/or entities transacting in or operating Cryptocurrency exchanges within their systems and ensure such accounts are closed immediately.”
The bank said that in line with the directives, any account identified as transacting or operating in Cryptocurrency exchanges within its system will be closed accordingly.
“We therefore request that you kindly use your accounts properly and for only permitted transactions.”
Some other financial institutions have been reported to have sent similar messages to their customers.
It will be recalled that the CBN, on February 5, 2021, issued a statement categorically banning the use of cryptocurrencies in Nigeria. The letter was addressed to banks and other financial institutions stating that dealing in cryptocurrencies and facilitating payment for cryptocurrency exchanges are prohibited. The Apex bank, however released another statement after bursts of outrage from Nigerians, noting that the directive “was only a reminder that cryptocurrencies were not legal tender in Nigeria and was reiterating a position the bank has held since 2017, not imposing new restrictions on the industry.”
The CBN stated that cryptocurrencies are issued by unregulated and unlicensed entities and as such, the use of cryptocurrencies in Nigeria contravened existing law as they are not legal tender. It also identified the anonymity of cryptocurrency as an issue. It stated that anonymity and the lack of KYC made it susceptible to illegal use such as money laundering and the financing of terrorism. Another justification was the volatility of cryptocurrencies which it said has threatened the stability of financial systems in other countries.
Prior to the official ban, CBN had consistently warned Nigerians and users of Cryptocurrencies, which include Blockchain technology, to be wary of investments in cryptocurrencies, asserting that virtual currencies are not accepted legal tenders in the country.
On September 14 2020, the SEC reported to have issued a statement announcing its intention to regulate “digital assets” which includes cryptocurrencies. This formed a slight contradiction to CBN’s firm standpoint on outright ban.
Subsequently, on February 11 2021, the SEC issued a statement stating that it would partner with the CBN to analyse and better understand the identified risks of cryptocurrency to ensure that appropriate regulations are put in place if cryptocurrency transactions are allowed in future.
Following this, in January, the Securities and Exchange Commission (SEC), the apex regulator of the Nigerian capital market, vide a public notice, warned Nigerians from investing in cryptocurrency because “none of the persons, companies or entities promoting cryptocurrencies has been recognized or authorized by it.”
Paxful, a leading peer-to-peer bitcoin marketplace, had in December, 20210, reported that Nigeria became the world’s second largest Bitcoin trading volume. Nigerians had traded 60,215 Bitcoins in the last five years, or more than $566 million USD.
Bitcoin trading volume was already growing at 20% per year. Then 2020 happened and created a 30% trading spike, with over 20,500 coins traded, or $451 million USD in that year alone. Obviously, COVID-19 pandemic response fuelled interest in cryptocurrencies.
On February 11, the Senate mandated its Banking and other Financial Institutions Committee to summon the CBN Governor, Godwin Emefiele, and the Director General of the Nigerian Securities and Exchange Commission, Lamido Yuguda, to appear before it to explain the opportunities and threats of cryptocurrency on the country’s economy and security and to report back findings .
Committees on Banking, Insurance and other Financial Institutions; ICT and Cybercrimes; and Capital Market will be briefed by SEC and CBN to determine the next course of action on cryptocurrency in Nigeria.
