Facts emerged Saturday night that Friday’s circular by Central Bank of Nigeria (CBN) prohibiting commercial banks and other financial institutions from facilitating payment for cryptocurrency transactions was an immediate reaction to the hijack of a commercial bank’s data and demand for a ransom payment in bitcoins.
According to a source, CBN was not against the use of cryptocurrencies and had not banned any individual from using it.
The regulator was only fulfilling its responsibilities of preventing unregulated actors from using the platforms of institutions it regulates to facilitate illegal transactions.
“CBN, like many other major central banks around the globe, is cautious about the use of bitcoins in their respective economies because of the threats its usage posed to their financial systems.
The concerns of the central banks prompted them to float the idea of issuing digital currencies, which would allow holders to make payments via the internet and offline, in a direct move to fend off threats of other existing means of electronic payment such as digital wallets, online banks or cryptocurrencies, which are risk-prone due to their speculative nature” the source noted.
Citing the proposed e-krona by the Riksbank of Sweden and advanced moves already made by the Peoples’ Bank of China (PBoC) to issue a digital currency as well as consultations by the European Central Bank and the Bank of England on the issue of digital currencies, our source said the concern of the CBN was valid and supported by all.
The source explained that no central bank in the world would ignore threats to the financial system it regulates adding that investigations revealed that cryptocurrencies had been used for laundering illicit funds, defrauding unsuspecting investors, scams and monetizing ransomware as was the case with the unnamed commercial bank in Nigeria.
The source then reiterated the need for Nigerians to be cautious in transacting in cryptocurrencies since they were highly volatile and not regulated by any central bank in the world nor insured by the government of any major economy.
While noting that naira remained the only legal tender recognized in the Nigerian financial system by the CBN Act (2007), as amended, he said allowing cryptocurrency traders, who were unregulated, to continue to utilize the platforms of institutions regulated by the CBN would be tantamount to the Bank abdicating its regulatory role of ensuring monetary and price stability as well as promoting a sound financial system.