Following the decision of the Central Bank of Nigeria to ban the use of cryptocurrency in the country, more facts have surfaced on why the swift decision was taken by CBN.
According to investopedia, A cryptocurrency is a digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend. Many cryptocurrencies are decentralized networks based on blockchain technology—a distributed ledger enforced by a disparate network of computers.
As noted by ThisDay, it has been revealed that, the federal government and the Central Bank of Nigeria were warned by the US Federal Bureau of Investigation (FBI), concerning the activities of scammers making use of cryptocurrency to illegally bring into the country millions of dollars obtained from the United States of America and other Western economies.
This was said to have particularly targeted Covid-19 stimulus packages designed to cushion the impact of lockdown measures on businesses and working families in these countries.
As investigated by ThisDay, Federal Bureau of Investigation has uncovered that fraudulent Nigerians, known as Yahoo Boys, took control of large chunks of money which were supposed to serve as stimulus in the wake of the devastating effects of the pandemic, which made many American citizens jobless.
In order to avoid been traced or detected, these fraudsters had been sending millions of dollars to Nigeria, through the use of cryptocurrencies, making it difficult for the authorities both in Nigeria and the United States to trace.
However, before these funds were used to destabilise the Nigerian economy, the CBN had to wield the big stick.
In the last six months, Nigeria is said to have become the second country in the world with the biggest cryptocurrency transactions.
According to highly placed sources within the presidency, “These fraudsters remitted between $200 and $300 million to Nigeria every week, using cryptocurrencies.
“The Central Bank and the federal government were clearly alarmed by this development and had to act fast before irreparable damage is done to the economy.”
Making this more disturbing, intelligence reports indicated that kidnappers had switched to bitcoin for ransom payments, making it more difficult for authorities to trace.
To make matters worse, investigations by FBI showed Nigeria did not have the underlining economic base to justify the massive flow of funds on a weekly basis. To compound the issue, was how the inflows were being routed leaving investigators puzzled and perplexed by the elaborated complicated channels in the digital money world of anonymity.
After the FBI tip-off that these funds being pumped into cryptocurrencies were products of fraud, the federal government, acting through the CBN, had to ban cryptocurrencies in Nigeria.
Much of the interest in the currency, not backed by any government, is to trade for profit, with speculators at times driving prices skyward.
But the CBN had, at the weekend, directed banks and other financial institutions to immediately close any accounts dealing in cryptocurrency or facilitating payment for cryptocurrency exchange, with immediate effect.
The banking regulatory authorities directed banks to expose any individual and entity running such accounts, warning that failure to adhere to the directives would attract strict sanctions.
The apex bank, in its circular on the issue, cautioned deposit money banks, (DMBs) non-bank financial institutions (NBFIs) and other financial institutions (OFIs) as well as members of the public on the risk associated with transactions in cryptocurrency.
The Director of Banking Supervision, Bello Hassan, and the Director of Payments System Management Department, Musa Jimoh, signed the circular.
“Further to earlier regulatory directives on the subject, the Bank hereby wishes to remind regulated institutions that dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited.
“Accordingly, all DMBs, NBFIs and OFIs are directed to identify persons and/or entities transacting in or operating cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately.
“Please note that breaches of this directive will attract severe regulatory sanctions. This letter is with immediate effect,” it stated.
However, the CBN directive had immediately drawn heavy criticisms from the Nigerian public, with a former Vice President, Alhaji Atiku Abubakar, advising the apex bank to reverse the decision, arguing that the country couldn’t close her economy at this time.
In a statement personally signed, Atiku said the number one challenge facing Nigeria was youth unemployment, explaining that it was not just a challenge, but also an emergency, because it affected the economy, and exacerbating insecurity in the nation.
Speaking against the backdrop of the decision of the CBN to ban and restrict banks transactions in the cryptocurrencies, Atiku said, “What Nigeria needs now, perhaps more than ever, are jobs and an opening up of our economy especially, after today’s report by the National Bureau of Statistics indicated that foreign capital inflow into Nigeria is at a four year low, having plummeted from $23.9 billion in 2019, to just $9.68 billion in 2020.”
He said already, the nation had suffered severe economic losses from the border closure, and the effects of the #COVID19 pandemic.
Accordingly, he explained, “This is definitely the wrong time to introduce policies that will restrict the inflow of capital into Nigeria, and I urge that the policy to prohibit the dealing and transaction of cryptocurrencies be revisited.
“It is possible to regulate the sub-sector and prevent any abuse that may be inimical to national security. That may be a better option, than an outright shutdown.
“There is already immense economic pressure on our youths. It must be the job of the government, therefore, to reduce that pressure, rather than adding to it.
“We must create jobs in Nigeria. We must expand the economy. We must remove every impediment towards investments. We owe the Nigerian people that much,” Atiku stated.