Again, CBN warns On Virtual Currencies
The Central Bank of Nigeria (CBN) has again cautioned Nigerians to be wary of investments in cryptocurrency, stressing that virtual currencies are not legal tender in Nigeria.
A press release issued by the Bank and made available to Economic Confidential in Abuja, reiterated that cryptocurrencies such as Bitcoin, Ripples, Monero, Litecoin, Dogecoin, Onecoin, etc and Exchanges such as NairaEx were not licensed or regulated by the CBN.
The statement signed by the Bank’s Acting Director in charge of Corporate Communications, Isaac Okorafor, emphasized that dealers and investors in any kind of crypto currency in Nigeria were not protected by law, thus may be unable to seek legal redress in event of failure of the exchangers or collapse of the business.
The CBN therefore warned Nigerians against investing in cryptocurrency as doing so would be at their own risk.
It will be recalled that the CBN on January 12, 2017, issued a circular to Banks and other financial institutions on virtual currency operations in Nigeria.
In the 2017 circular signed by the Director, Financial Policy and Regulation Department, Kevin Amugo, the CBN had among other issues noted that virtual currencies were traded in exchange platforms that are unregulated, all over the world. It further noted thattransactions in virtual transactions in virtual currencies were largely untraceable and anonymous thereby making them susceptible to abuse by criminals , in money laundering and financing of terrorism.
Recall that the bitcoin boom in Nigeria recently drew opposition from its lawmakers.
The senate has asked Nigeria’s central bank and other regulators to “investigate the proliferation of bitcoin” and do more to educate citizens about “the dangers” of the cryptocurrency.
Much of the lawmakers’ fears are based on recent events after Mavrodi Mundial Moneybox (MMM), a Russian ponzi scheme, became popular in Nigeria snapping up over two million users. After a strong run, during which the scheme awarded users with 30% interest rates per month, it collapsed in December 2016. Nigeria’s central bank estimates that users lost $50 million.
In a bid to bounce back, MMM’s adminstrators urged what was left of its user base to trade in bitcoin rather than cash. It’s likely that the early association between the ponzi scheme and bitcoin tainted the cryptocurrency in the minds of many. That much was clear as lawmakers described the bitcoin using words like “a financial scam” and “unethical.”
In any case, the lawmakers concerns might be a little too late as bitcoin trading in Nigeria has skyrocketed with weekly bitcoin trade volume surpassing 1 billion naira ($2 million) in August 2017 on LocalBitcoin, a global bitcoin exchange. Local bitcoin exchanges have also emerged to serve a quick growing market. Beyond the formal exchanges, peer-to-peer trading via private groups on messaging apps has also become prominent.
While some speculators have tried to cash in on bitcoin’s recent price surges, for many Nigerians cryptocurrencies have proven popular for practical reasons. Bitcoin and other cryptocurrencies offer a way to get around the various restrictions and regulations on dollar transactions over the last 18 months by Nigeria’s central bank. For example users will pay for services online and send payment internationally using bitcoin since there were limits to how much naira could be exchanged for dollars at reasonable exchange rates.