CBN’s war on cryptocurrency

In war, it is said that truth is usually the first casualty. While the Central bank of Nigeria (CBN) continued its war on cryptocurrency (crypto) last week by threatening banks and other financial institutions that persisted in facilitating payments for crypto transactions, victims of the policy, opposition party members, and the international committee kicked against the move, describing it as unfair, oppressive and retrogressive.

The latest onslaught on cryptocurrency came in the form of a letter reminding banks of a regulation preventing them from facilitating crypto payments. As an addendum, the communique compelled banks to close accounts belonging to crypto traders. It is not clear why the CBN, suspected to be acting with the federal government’s authorisation, was not more prudent in its war on crypto currency and why it left the public to speculate on the reasons behind its policies which have now been classed draconian.

Indeed, the policy was not communicated to those involved in trading cryptocurrency directly, but to banks and other financial institutions, leaving those on the wrong side of the tracks to find out about the policy the hard and shocking way. It was less than ideal, unfair and insensitive to come to a decision of that nature, affecting the finances of many Nigerians, without a dialogue with stakeholders.

The CBN statement read: “Further to earlier regulatory directives on the subject, the bank hereby wishes to remind regulated institutions that dealing with cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited. Accordingly, all Deposit Money Banks, Non-Bank Financial Institutions, and Other Financial Institutions are directed to identify persons and/or entities transacting in or operating cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately. Please, note that breaches of this directive will attract severe regulatory sanctions.

The letter takes immediate effect.” Why would someone who trades legitimately suddenly have their accounts closed, with banks being banned from facilitating any payments in their legitimate business?

The altruism or otherwise of the CBN’s choking policy remains moot for the moment, but the jury is out on their being up to no perceptible good. Like every other digital innovation, cryptocurrency has its advantages and disadvantages. It is a decentralised currency operated on what is called blockchain. Blockchain simply means that the digital security and records of the currency are not on just one computer, but on multiple computers linked by a peer-to-peer network. In a word, it is not subject to the same dynamics of national currencies.

The currency is used for trading in goods and services primarily on the internet. There are applications called “wallets” where people can store any of the more than 4000 known cryptocurrencies and withdraw money to their bank accounts or to paypal. It is perfectly legal and many governments around the world have acknowledged the currency’s validity, seeking instead to regulate its use. It is difficult to trace since it is not physical but can be transferred from one party to another through those wallets without the government knowing about it. So, how does the government plan to kill a ghost it cannot trace? The CBN may be embarking on a wild goose chase with the war on cryptocurrency. Many traders have promised that the CBN will be buying itself a place in the sun with its intended policy to prevent Nigerians from trading in cryptocurrency, for there are more avenues for trading cryptocurrency than the government can monitor.

The paint was not dry on the announcement banning financial institutions from trading in crypto than international crypto brokers advised Nigerians to employ peer to peer trading and exchange. The only disadvantage to this method and the injury that crypto traders have suffered is that they now make less profits from their trade since they first have to trade their cryptocurrency with a foreign currency before converting to the naira. More, the stifling policy has given bored programmers something to think about, and think they will.

The federal government has often emphasised its desire to diversify the economy. Cryptocurrency should have been an avenue for that much needed diversification. A research released last month showed that Nigeria alone transacts cryptocurrency worth $200 million every month. That is money got from outside the country and put into circulation within the Nigerian economy legally through cryptocurrency. It was also a creator of highly paying jobs and revenue for Nigerians. Although it was thoughtful of the federal government to recognise the risks associated with cryptocurrency, it was a trade that was more beneficial to the economy than it was detrimental, and, in a country that witnesses several woes daily, it was not the brightest idea to stir a nest of sleeping hornets.It would have been a small matter to meet with stakeholders and create progressive policies to regulate trade in crypto and mitigate the attendant risks as every other country in the world except China has done, including the western world that the government has perennially imitated in its abysmal handling of COVID-19. It was this same hasty decision making process that made the federal government shut the country’s borders, preventing trade and causing an avoidable inflation. That hasty decision is one the government has since regretted and reversed but not learnt from. The risks are known to traders who deal in the currency, as well as the international companies that now transact with them. Many Nigerian youths trade in cryptocurrency due to lack of jobs and the need for a legitimate means of survival. How does the CBN not know that when people’s ability to choose their own business risk is taken from them, they will revolt in many different ways? Are there no thinkers in the halls of federal power to remind decision makers that it is hubris to assume that federal might is reposed in the few politically appointed office holders and not the people?

As with any other policy, the benefits of the affected issue have to be weighed on a scale against its demerits. This is a step most of the western world has taken to mitigate the risks that the CBN appears interested in eliminating. To become a crypto broker, the prospective crypto trader must have a minimum share capital of $25m. That way, should the cryptocurrency crash, the investors would not be on the receiving end; the broker will.  There are those who argue that most of the affected people who trade in cryptocurrency are international companies and youths. These youths are becoming experts in financial technology (Fintech) and have developed payment platforms for carrying out many transactions in several currencies. The unemployment woes in Nigeria are not strange to anyone. It is well-documented that many graduates with degrees do not have jobs due to the failure of successive visionless governments to create an enabling structure that will maximise the potential of the Nigerian labour market. Graduates apply for jobs as drivers while their less educated counterparts simply take to crime. Remote working, freelance working, digital marketing, forex trading and cryptocurrency trading are some of the few legal avenues youths have taken to in their bid to mitigate the harsh reality of a visionless leadership that has alienated them and still not chosen to acknowledge their potentials.

There are many countries that would give anything to have a population of youths as literate and zealous for work as Nigeria. There are also many countries that would want to diversify their economy to allow for ample inflow of money through crypto trading. South Africa, for instance, has five bitcoin ATMs. The progressive thing for the Nigerian government to do was to support a trade that did what they failed to do — provide employment for the youths — through regulations to reduce the risks associated to the barest minimum. The CBN’s policy primarily affects the youths who have for a long time been quiet in the face of oppressive and bad governance. It is not clear why federal appurtenances are goading them to wrath again.

*Written By Paul Ade-Adeleye