More facts have emerged on why the financial institution of Nigeria (CBN) decided to ban cryptocurrency trading within the country.
The apex bank prohibited dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges last week Friday.
Investigations by THISDAY have revealed that the federal and therefore the CBN was warned by the United States’ Federal Bureau of Investigation, (FBI), on the activities of fraudsters using cryptocurrencies to bringing into the country many many US Dollars illegally obtained from the USA and other Western economies.
This was said to possess particularly targeted COVID-19 stimulus packages designed to cushion the impact of lockdown measures on businesses and dealing families in these countries.
In an interview at a Reuters online event last week Wednesday, President of the ECU financial institution, Christine Lagarde said of bitcoin: “It’s a highly speculative asset that has led to some reprehensible activity, including concealment, and any loopholes got to be closed.
“There has got to be regulation. This has got to be applied and prescribed at a worldwide level because if there’s an escape that escapes are going to be used; she said.
According to THISDAY investigation, “FBI had discovered that fraudulent Nigerians, popularly referred to as yahoo boys, took control of huge chunks of cash released because the stimulus within the wake of the devastating effects of the COVID-19, which has put many Americans out of jobs.”
To avoid detection, these fraudsters had been sending many dollars to Nigeria through cryptocurrencies. This made it difficult for the authorities in both Nigeria and therefore the US to trace the illicit monies.
However, before these funds were wont to destabilize the Nigerian economy, the CBN had to wield the large stick.
In the last six months, Nigeria is claimed to possess become the second country within the world with the most important cryptocurrency transactions.
According to highly placed sources within the presidency, “These fraudsters remitted between $200 and $300 million to Nigeria hebdomadally, using cryptocurrencies.
“The financial institution and therefore the federal was clearly alarmed by this development and had to act fast before irreparable damage is completed to the economy.” Even more disturbing was that intelligence reports indicated that kidnappers had switched to bitcoin for ransom payments, making it increasingly difficult to trace.
To make matters worse, investigations by the FBI showed Nigeria didn’t have the underlining economic base to justify the huge flow of funds hebdomadally. To compound the difficulty, was how the inflows were being routed leaving investigators puzzled and perplexed by the elaborated complicated channels within the digital money world of anonymity.
After the FBI tip-off that these funds being pumped into cryptocurrencies were products of fraud, the federal, acting through the CBN, had to ban cryptocurrencies in Nigeria.
A cryptocurrency (or crypto) may be a digital unregulated currency that would be wont to buy goods and services but uses a web ledger with strong cryptography to secure online transactions.
Much of the interest within the currency, not backed by any government, is to trade for profit, with speculators sometimes driving prices skyward.
But the CBN had, at the weekend, directed banks and other financial institutions to right away close any accounts dealing in cryptocurrency or facilitating payment for cryptocurrency exchange, with immediate effect.
The banking regulatory authorities directed banks to show a person and entity running such accounts, warning that failure to stick to the directives would attract strict sanctions.
The apex bank, in its circular on the difficulty, cautioned deposit money banks, (DMBs) non-bank financial institutions (NBFIs), and other financial institutions (OFIs) also as members of the general public on the danger related to transactions in cryptocurrency.
The Director of Banking Supervision, Bello Hassan, and therefore the Director of Payments System Management Department, Musa Jimoh, signed the circular.
“Further to earlier regulatory directives on the topic, 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 spot persons and/or entities transacting in or operating cryptocurrency exchanges within their systems and make sure 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 chairman, Alhaji Atiku Abubakar, advising the apex bank to reverse the choice, arguing that the country couldn’t close her economy at this point
In a statement personally signed, Atiku said the amount one challenge facing Nigeria was youth unemployment, explaining that it had been not just a challenge, but also an emergency because it affected the economy, and exacerbating insecurity within the nation.
Speaking against the backdrop of the choice of the CBN to ban and restrict banks transactions within the cryptocurrencies, Atiku said, “What Nigeria needs now, perhaps quite ever, are jobs and a gap from 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 only $9.68 billion in 2020.”
He said already, the state had suffered severe economic losses from the border closure, and therefore the effects of the #COVID19 pandemic.
Accordingly, he explained, “This is certainly the incorrect time to introduce policies which will restrict the inflow of capital into Nigeria, and that I urge that the policy to ban the dealing and transaction of cryptocurrencies be revisited.
“It is feasible to manage the sub-sector and stop any abuse which will be inimical to national security. which will be a far better option, than an outright shutdown.
“There is already immense economic pressure on our youths. It must be the work of the govt, therefore, to scale back that pressure, instead of adding thereto.
“We must create jobs in Nigeria. We must expand the economy. We must remove every impediment towards investments. We owe the Nigerian folks that much,” Atiku stated.