The Central Bank of Nigeria responds to comments on its Feb 5 directive prohibiting DMBs and financial institutions from dealing with cryptocurrency exchanges.
Dated February 7, 2021.
Response to Regulatory Directive on Cryptocurrencies
The attention of the Central Bank of Nigeria (CBN) has been drawn to various comments and reactions following our recent reminder to Deposit Money Banks (DMBs) to desist from transacting in / and with entities dealing in cryptocurrencies. Most of these reactions reveal that there appears to be a need to provide further justifications about our position, especially to the general public.
For those who are not conversant with the universe of cryptocurrencies, it is important to state that Cryptocurrencies are digital or virtual currencies issued by largely anonymous entities and secured by cryptography. Cryptography is a method of encrypting and hiding codes that prevent oversight, accountability, and regulation. While there are a number of cryptocurrencies now in circulation, Bitcoin was the first to be introduced in 2009, and now accounts for about 68 percent of all cryptocurrencies.
As regards our recent policy pronouncement, 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 . Indeed, this position was reiterated in another CBN Press Release dated February 27, 2018.
It is also important to note that the CBN’s position on cryptocurrencies is not an outlier as many countries, central banks, international financial institutions, and distinguished investors and economists have also warned against its use. They have all made similar pronouncements based of the significant risks that transacting in cryptocurrencies portendrisk of loss of investments, money laundering, terrorism financing, illicit fund flows and criminal activities.