The Central Bank of Nigeria (CBN) in a rather surprising and shocking move has ordered banks, non-bank institutions, and other financial institutions to identify and immediately close all crypto accounts within their systems.
The CBN in a circular signed by Director of Banking Supervision, Bello Hassan and Director of Payments System Management Department Musa Jimoh reminded banks and the public of the risk associated with transacting in cryptocurrencies.
“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 DMB, NBFIs and OFIs are directed to identify persons and/or entities transacting in or opening cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately”, the circular said.
The CBN warned banks of dire consequences if they do not comply with the fresh directive.
Decision shows Nigeria is being governed by analogue leaders– crypto is the currency of the future
It is quite unfathomable and incomprehensible that a progressive government would make the decision to restrict banks and other financial institutions from holding or processing crypto funds in Nigeria.
Crypto is the currency of the future and governments as well as giant tech companies like Facebook, PayPal, and Mastercard have backed bitcoin, Ethereum, Ripple and Tether amongst others. This is happening despite the volatility of cryptos and the fact that it is virtually unregulated.
Sadly, the Nigerian government led by President Muhammadu Buhari clearly does not understand this. If they do, this order won’t even come up. Apparently, Nigerians are being led by political actors who have analogue minds and are unprepared for a digital revolution.
A digital revolution that would be youth-driven and sideline the so-called ‘old men’ who have technophobic leanings. This is why they are always scheming to restrict or ban social media.
The government must realise that Nigeria is not an island. Fiat money is no longer the only means of exchange. Cryptos are now means of exchange regardless of whether it is backed by law or not.
Bitcoin, the largest crypto exchange in the world, is now worth close to $38,000. With the possibility of the crypto either rising and falling at any time, there is a high chance you can either profit or lose all your investment.
As such, the government that does not provide employment to young Nigerians cannot stop them from investing their hard-earned money in cryptos despite the risks involved.
Two Government Institutions, Two Different Crypto Policies
In September last year, Nigeria’s Securities and Exchange Commission (SEC) announced that it would commence the regulation of trade in cryptocurrency assets to protect investors and ensure market integrity and transparency.
SEC said in a statement that digital assets offerings provide alternative investment opportunities for the investing public, noting that it is, therefore, essential to ensure that these offerings operate in a manner that is consistent with investor protection, the interest of the public, market integrity and transparency.
Presently, the SEC’s plans to regulate cryptocurrency trading in Nigeria are unarguably null and void due to this new CBN policy.
Order connected to #EndSARS protests?
Over the years, we have come to understand that policies introduced by successive Nigerian governments are never based on data or merit. They are largely hinged on sentiments.
This decision is not likely to be different. Recall that during the #EndSars protests the government via CBN blocked the accounts of persons and organisations thought to be supporting the protests.
At the forefront of the protest support was Feminist Coalition. The group raised funds for medical bills, legal aids, and other necessary supports for people protesting against police brutality.
The Coalition whose bank account was deactivated resorted to accepting donations in bitcoin to fund its protest activities.
Its summary of accounts showed a bitcoin balance that accounted for around 40% of the $387,000 raised in total.
The inability of the government to stop the BTC donations probably angered them. Hence, this is payback time.
Mass adoption of crypto made Nigeria become second-biggest bitcoin market in the world
Nigeria traded more than $566 million worth of bitcoin between 2015 and 2020, making it the world’s second-largest peer-to-peer (P2P) bitcoin market after the U.S., which traded $3.75 billion in the period under review.
According to an analysis of bitcoin trading platform Paxful’s database, Nigeria has traded the equivalent of 60,215.7 BTC – more than any other country in the world. Only the U.S. exchanged more bitcoin – 535,660.3 BTC.
If this current government follows trends, they should know that many Nigerians have bitcoin investments. Rather than introduce policies that may lead to losses, they should have simply taken actions that will safeguard and protect these investments.
Nigerian crypto startups thrown into confusion
There are quite a handful of crypto startups in Nigeria and without any doubt, this ridiculous and outlandish policy has thrown them into confusion.
Already, some crypto businesses and payment gateways have suspended crypto transactions in line with the CBN policy.
In an email to its customers, Flutterwave said it would no longer offer crypto services in Nigeria.
“In light of the recent directive by the Central Bank of Nigeria prohibiting financial institutions from engaging in cryptocurrency, we regret to inform you that we will not be able to further extend our services to support cryptocurrency use cases in Nigeria, in line with our Terms and Conditions.
“We apologize for any inconvenience that this might present, and reiterate our commitment to supporting your other payment needs.”
For Trove, the investment platform said that they are currently studying the CBN circular and have disabled crypto trading to comply with the memo.
“Our attention has been drawn to the CBN memo currently circulating across the internet restricting Cryptocurrency trading within the country.
“We are currently assessing the situation and are engaging relevant stakeholders.
“However, we have temporarily disabled the trading of cryptocurrencies on the application in a bid to immediately comply with CBN’s memo.”
Quidax expressed disappointment with the CBN policy but said “We have planned for days like this.”
It continued: “We are currently keeping an eye out and have engaged the CBN as well as our payment partners regarding this policy. Once we get more updates regarding the situation you will be the first to know. In the meantime keep calm and relax, after all, it’s already the weekend.
“Sadly, deposits through all channels have been temporarily paused as CBN’s policy affects our payments partners. Withdrawals are still going through but are slower than usual.”
It concluded by assuring users that their funds are safe.
Bundle said: “We’re aware of the notice on cryptocurrency-related Naira payments shared by the CBN today.
“Trading has not stopped and your assets remain as safe as ever. We are monitoring the situation closely and we’ll share updates as we have them. Thank you for your support.”
On its part, Patricia said: “Thank you for checking up on us. Your business is our business and we are confident to reassure you that services will continue to run and your funds are safe.
“In line with the recent CBN directives, we’ve temporarily paused all funds transfers. We will keep you informed on the latest update. Keep doing the most and thank you for choosing Patricia.”
Luno said in a statement that “We are aware of the circular issued by the Central Bank of Nigeria. We’re working hard to resolve this issue as quickly as possible. All customer funds are completely safe.”
It added “Luno will continue to operate as normal while we seek further clarity from the authorities. Some Naira deposit methods are currently affected, please check the status page for updates. Withdrawals are unaffected and will continue to be processed, but may take longer than usual. All customer funds are completely safe.”
Binance said in a statement that: “We’re aware of the CBN circular on crypto-related NGN payments & are monitoring this closely. NGN deposits via our fiat channel are temporarily suspended but withdrawals remain available.
“From 7PM (GMT+1) on Feb 5th 2021, Binance will temporarily suspend NGN deposits through our fiat partner channels. Withdrawal services remain normal and will continue to be processed but might take slightly longer time than usual. We apologise for any inconvenience this may cause.”
BuyCoins said: “Thanks to everyone who has reached out. We are fully aware of the newest CBN circular and are going to be working with regulators to ensure our services are compliant. All trading on our platforms continues as usual, and all user funds are safe.”
Yellow Card on its part said it is still operational in Nigeria and in line with the CBN memo, they have temporarily disabled NGN deposits, but NGN and BTC withdraws are still running smoothly
