Early this month, there was a stir in the world of digital currencies when the Central Bank of Nigeria, CBN, pulled the plug off trading in Cryptocurrency.
A Cryptocurrency or crypto is a digital asset designed to work as a medium of exchange wherein individual coin ownership records are stored in a ledger existing in a form of computerized database.
The evolution of crypto is traceable in part to the American cryptographer David Chaum, who in 1983 conceived an anonymous cryptographic electronic money called e-cash.
Unlike conventional currency, crypto does not exist in physical form (like paper money) and not issued by a central authority, thus encryption, which Cryptocurrency thrives on, prevents oversight, accountability, and regulation.
Records show that in the last five years, Nigeria has traded sixty thousand, two hundred and fifteen bit coins, valued at more than five hundred and sixty-six million dollars which is the largest volume worldwide on a leading peer-to-peer bit coin market place.
For example, between January and September, during the lockdown, a bit coin platform reported a one hundred and thirty-seven percent increase in new registrations in Nigeria.
Amidst the criticisms and argument that trailed its action, the CBN had sought to clarify its position.
According to the apex financial regulatory body, its pronouncement about Cryptocurrency on February 5, 2021 was not in any way a new restriction as all banks in the country had earlier been forbidden, through CBN’s circular dated January 12, 2017, not to use, hold, trade and/or transact in Cryptocurrencies.
While expressing concern that Cryptocurrencies are issued by unregulated and unlicensed entities, it pointed out the use of Cryptocurrency in the country which goes against CBN key mandates enshrined in the CBN act (2007) as the issuer of legal tender in Nigeria.
Cryptocurrency is not restricted to Nigeria, how then is crypto viewed in other countries globally and by financial institutions?
There is a consensus by global financial regulators about the significant risks that transacting in Cryptocurrencies portends which includes loss of investments, money laundering, terrorism financing, illicit fund flows and criminal activities.
According to reports, the CBN was recently alerted by the FBI that scammers were using Cryptocurrencies to defraud people, as internet fraudsters raked large chunks of money released as stimulus in the wake of the devastating effects of the COVID-19, which put many Americans out of jobs.
Also, fraudsters were said to have remitted between $200 and $300 million to Nigeria every week, using Cryptocurrencies.
Incontrovertibly, insecurity remains a daunting concern in the country with mounting attacks from Boko Haram, bandits and other criminal elements who obviously have financial bulwark for arms purchase.
Besides terrorists, Cryptocurrency, going by its cryptic nature is a safe haven or outlet for drug cartels in receiving clandestine payments with third parties, financial regulators effectively sidestepped.
It is quite essential that the government keep track of nefarious activities to tackle growing security and economic threat.
In the light of this, the government needs to significantly sensitize Nigerians on how skewed the demerits of Cryptocurrency are compared to its perceived advantages.
To further strengthen the justification for the step taken on crypto, CBN might need to constantly engage Nigerians on air and online with emerging facts and trends in Cryptocurrency demerits.