Former deputy governor of the Central Bank of Nigeria, Prof Kingsley Moghalu has faulted the bank’s recent directive to financial institutions to stop cryptocurrency transactions.
Recall that the CBN had, last Friday ordered Nigerian banks to close all cryptocurrency-related accounts.
In the letter, the CBN referenced a circular it issued on January 12, 2017, which 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 of cryptocurrency.
In that memo issued in 2017, the bank had said digital currencies such as bitcoin, litecoin, and others are largely used in terrorism financing and money laundering since most transactions are executed virtually.
In a statement by its acting director, corporate communications, Mr. Osita Nwanisobi, yesterday, the bank explained that clamped down on the digital currency because it is used for money laundering and terrorism financing.
“The use of cryptocurrencies in Nigeria are a direct contravention of existing law,” he said.
“It is also important to highlight that there is a critical difference between a Central Bank issued Digital Currency and cryptocurrencies.
“As the names imply, while Central Banks can issue Digital Currencies, cryptocurrencies are issued by unknown and unregulated entities.
“The very name and nature of “cryptocurrencies” suggests that its patrons and users value anonymity, obscurity, and concealment.
“The question that one may need to ask therefore is: why any entity would disguise its transactions if they were legal. It is on the basis of this opacity that cryptocurrencies have become well-suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion.
“Indeed, many banks and investors who place a high value on reputation have been turned off from cryptocurrencies because of the damaging effects of the widespread use of cryptocurrencies for illegal activities,” he said.
Reacting to the development, Moghalu argued that the Securities and Exchange Commission (SEC) recognises cryptocurrencies as financial assets.
Moghalu who stated this on Arise TV’s ‘The Morning Show’ declared: “There is regulatory dysfunction, there is lack of regulatory coordination. The Securities and Exchange Commission recognises cryptocurrencies as financial assets and in September last year, they said they will be issuing a regulatory framework for it. So, it does look as if the right hand does not know what the left hand is doing.”
He said there is no means of exchange devoid of risk, adding that if the CBN could manage the risks of paper currency and electronic payments and other means of exchange, it should also be able to mitigate the risks associated with digital platforms such as cryptocurrencies.
“I can understand their (CBN) concern –criminality and fraud, but every medium of exchange is subject to fraud and criminality. This was why when I was in the Central Bank, I led the team that introduced the Bank Verification Number. It was to act as a unique identifier to improve the security and efficiency of the payment system.
“So, I don’t see why there should be the declaration of the some sort of Third World War between the CBN and cryptocurrencies.”
Moghalu also said some central banks all over the world were already adapting to cryptocurrency transactions because they recognise the inevitability of innovation.
He, therefore, urged the CBN to come up with the regulatory framework to monitor cryptocurrency transactions rather than restricts financial institutions from having anything to do with it.
“I would have preferred some deep thinking about some regulatory framework that restricts the use of cryptocurrency or subject it to some sort of surveillance that alerts the Central Bank if there are serious abuses that can affect the financial system stability.
“The bank has to be worried about the stability of our financial system and that is what its concern is. You have to be able to monitor to see whether the signs are coming up and you can stop trading or do other things.
“But an outright ban of financial institutions from having accounts associated with cryptocurrency exchanges or cryptocurrency trading wasn’t necessarily the best approach to the problem. That is what I think even though I understand why they have done it,” the ex-CBN deputy governor said.
On the argument that cryptocurrency transactions are used to finance terrorism, Moghalu urged the apex to fish out the sponsors of Boko Haram and other non-state actors.
“During the #EndSARS movement, Bitcoin and other cryptocurrencies were used to support the peaceful protests when the Central Bank started restricting access to account of people who supported the protest which was a move I did not support. I’m not sure it is the business of the Central Bank to clamp down on peaceful protesters in the name of national security.
“If we are so concerned about counter-terrorism and terrorism financing, perhaps, it (CBN) should place a lot of efforts in finding the financiers of Boko Haram which is killing people in the North-East of the country. We have the tendency in Nigeria to be focused on the wrong things and to be chasing shadows,” he stated.
With Premium Times, Punch reports
