While briefing a joint Senate Committee on Banking, Insurance and Other Financial Institutions; ICT and Cybercrime; and Capital Market, on its directive to institutions under its regulation, the Central Bank Governor, Mr. Godwin Emefiele on Tuesday said the bank’s decision to prohibit deposit money banks, non-banking institutions and other financial institutions from facilitating trading and dealings in cryptocurrency was in the best interest of Nigerian depositors and the country’s financial system.
Describing the operations of cryptocurrencies as dangerous and opaque, the CBN governor said the use of cryptocurrency contravened an existing law.
According to him, the fact that cryptocurrencies were issued by unregulated and unlicensed entities made it contrary to the mandate of the bank, as enshrined in the CBN Act (2007) declaring the bank as the issuer of legal tender in Nigeria.
Emefiele, who also differentiated between digital currencies, which central banks could issue and cryptocurrencies stressed that the anonymity, obscurity and concealment of cryptocurrencies made it suitable for those who indulge in illegal activities such as money laundering, terrorism financing, purchase of small arms and light weapons and tax evasion.
He declared that cryptocurrency was not legitimate money because it was not created or backed by any central bank.
“Cryptocurrency has no place in our monetary system at this time and cryptocurrency transactions should not be carried out through the Nigerian banking system,” he said.
The Director-General, the Securities and Exchange Commission, Mr Lamido Yuguda, also clarified that there was no policy contradiction between the CBN directive and the pronouncements made by the SEC on the subject of cryptocurrencies in Nigeria.
He explained that the SEC made its pronouncement at the time to provide regulatory certainty within the digital asset space due to the growing volume of reported flaws.
Prior to the CBN directive, he said, the SEC had in 2017 cautioned the public on the risks involved in investing in digital and cryptocurrency. He also stated that the CBN, the Nigeria Deposit Insurance Corporation and the SEC had between 2018 and 2020 issued warnings on the lack of protection in investments in cryptocurrency.
The Chairman, Independent Corrupt Practices and Other Related Commission, Bolaji Owasanoye, said the #EndSARS protest was largely financed by funds sourced from cryptocurrency.
The ICPC boss said it was an indication that it could be used to fund insurgency. He therefore supported the position of the Central Bank of Nigeria on the ban of cryptocurrency, stating that cryptocurrency had been linked to money laundering and terrorism financing.
In his welcome remarks, the Chairman of the Joint Senate Committee, and Chairman, Senate Committee on Banking, Insurance and Other Financial Institutions, Senator Uba Sani, said the committee was on a fact-finding mission and had no pre-emptive recommendation or stand and would make its position known only after it had reviewed the submissions made by stakeholders.