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Nigeria Needs Innovative Regulation of Crypto Currencies Not Outright Ban

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Hats off to the Central Bank of Nigeria (CBN) for being the one of the first countries in the world to release a Central Bank Digital Currency (CBDC).

With the CBN being ahead of the curve in that instance it may be wise for it to have a second look at its policies which have pretty much put a halt to Nigeria’s leadership position regarding Bitcoin and other cryptocurrencies on the African continent.

The CBN under Governor Godwin Emefiele, recently took a decision to prohibit deposit money banks, non-banking institutions, and other financial institutions from enabling cryptocurrency trading and dealings in Nigeria.

Emefiele, while briefing a joint Senate Committee on Banking, Insurance and Other Financial Institutions; ICT and Cybercrime; and Capital Market, on the directive, earlier in the year differentiated between digital currencies, which Central Banks can issue and cryptocurrencies issued by unknown and unregulated entities.

He stressed that the anonymity, obscurity, and concealment of cryptocurrencies made it suitable for those who indulge in illegal activities such as money laundering, terrorism financing, purchase of small arms and light weapons and tax evasion.

Citing instances of investigated criminal activities that had been linked to cryptocurrencies, he stated that the legitimacy of money and the safety of Nigeria’s financial system was central to the mandate of the CBN, even as he declared that

“Cryptocurrency is not legitimate money” because it is not created or backed by any Central Bank. “Cryptocurrency has no place in our monetary system at this time and cryptocurrency transactions should not be carried out through the Nigerian banking system,” he added.

Before the chill brought about by the CBNs ban, Nigeria was a leading light for cryptocurrency innovation in Africa.

Nigeria, Africa’s largest economy, ranked sixth on a list of top 20 countries globally with the highest grassroots crypto adoption as disclosed in the 2021 Chainalysis Global Crypto Adoption Index report.

According to the report, the African region has one of the highest grassroots adoptions, with Kenya, Nigeria, South Africa, and Tanzania ranking in the top 20 of its Global Crypto Adoption Index.

Many global Central Banks have been in a dilemma on how to regulate crypto currencies and in a sense the CBN is not alone.

The CBN should then scan the globe to seek out jurisdictions that are addressing the crypto regulation problem innovatively while allowing their economies to benefit from being crypto hubs.

Analysts tell MoneyCentral that the Nigerian Federal Government and Central Bank should take note of best practices in the regulation of crypto currencies globally and begin to make Nigeria a hub for blockchain and crypto development and trading on the African continent.

One example could be studying a proposed legislation by the Indian government to ban the use of cryptocurrencies for transactions and payments but recognize them as assets.

The Economic Times reported last week that the Modi government will introduce a crypto regulation bill in the winter session of Parliament. The newspaper said the bill’s final details are being worked out, citing sources familiar with the matter.

Additionally, the government will ban “active solicitation” from crypto firms, including exchanges and platforms.

That means that there will be a ban on advertising crypto and crypto products. In anticipation of regulatory clampdowns, cryptocurrency exchanges in India like WazirX and Bitbins have already stopped advertising.

Despite the Modi government’s love/hate relationship towards crypto, there won’t be a blanket ban on crypto.

Instead, the bill will represent a middle ground, ET reported. A person familiar with the matter told the newspaper: “The overall view within the government is that the steps taken should be proactive, progressive, and forward-looking as it was an evolving technology.”

There is a possibility that the Securities and Exchange Board of India (SEBI), India’s financial watchdog, will be designated as the regulator, but that has yet to be confirmed, per the report.

Despite all the hurdles, India’s digital currency market reached $6.6 billion in May 2021, compared to $923 million in April 2020, and favorable regulations will help the country grow in the crypto sector.

Nigerian Vice president Yemi Osinbajo is another voice of reason urging innovative regulation of the sector.

Rather than adopt a policy that prohibits cryptocurrency operations in the country, “we must act with knowledge and not fear” and develop a robust regulatory regime that is thoughtful and knowledge-based, the Vice President said in a summit recently.

One must hope that the CBN is ready to listen to help unlock creative forces in Nigeria that would make the country the hub of crypto and block chain in Africa.

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