The Central Bank of Nigeria (CBN) has explained reasons behind banning of cryptocurrency which has generated controversies and condemnation across the nation.
In a statement on Sunday, Osita Nwanisobi, Acting Director, Corporate Communications, clarified that that the CBN circular of February 5, 2021 did not place any new restrictions on cryptocurrencies.
He recalled that 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.
Nwanisobi noted that the CBN’s position on cryptocurrencies is not an outlier as many countries, central banks, international financial institutions, and distinguished investors and economists have also warned against its use.
He said China, Canada, Taiwan, Indonesia, Algeria, Egypt, Morocco, Bolivia, Kyrgyzstan, Ecuador, Saudi Arabia, Jordan, Iran, Bangladesh, Nepal and Cambodia have all placed certain level of restrictions on financial institutions facilitating cryptocurrency transactions.
CBN said in China, cryptocurrencies are completely banned and all exchanges closed as well.
Nwanisobi said even famed investor Warren Buffett has called cryptocurrencies “rat poison squared,” a “mirage,” and a “gambling device.”
“Mr. Buffett believes it is a “gambling device” given that they are mostly valuable because the person buying it does so, not as a means of payment; but in the hope they can sell it for even more than what they paid at some point.
During an online forum hosted by the Davos-based World Economic Forum few weeks ago, Andrew Bailey, the Governor of the Bank of England, highlighted the extreme price volatility of cryptocurrencies as one of the biggest flaws and explained that this flaw makes it impossible for them to be used as a lasting means of payment.
“It is not surprising he would take that position because, Bitcoin, the best-known cryptocurrency, hit a record high of $42,000 per unit on January 8, 2021, and sank as low as $28,800 about two weeks later. This is far greater volatility than is found with normal currencies.”
CBN listed the justifications for CBN’s recent policy reminder.
Nwanisobi said first, in light of the fact that they are issued by unregulated and unlicensed entities, their use in Nigeria goes against the key mandates of the CBN, as enshrined in the CBN Act (2007), as the issuer of legal tender in Nigeria. In effect, the use of cryptocurrencies in Nigeria are a direct contravention of existing law.
He highlighted the critical between a Central Bank issued Digital Currency and cryptocurrencies, adding that as the names imply, while Central Banks can issue Digital Currencies, cryptocurrencies are issued by unknown and unregulated entities.
“Second, the very name and nature of “cryptocurrencies” suggests that its patrons and users value anonymity, obscurity, and concealment. The question that one may need to ask therefore is, why any entity would disguise its transactions if they were legal. It is on the basis of this opacity that cryptocurrencies have become well-suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion.
“Indeed, many banks and investors who place a high value on reputation have been turned off from cryptocurrencies because of the damaging effects of the widespread use of cryptocurrencies for illegal activities. In fact, the role of cryptocurrencies in the purchase of hard and illegal drugs on the darknet website called “Silk Road” is well known. They have also been recent reports that cryptocurrencies have been used to finance terror plots, further damaging its image as a legitimate means of exchange.
“More also, repeated and recent evidence now suggests that some cryptocurrencies have become more widely used as speculative assets rather than as means of payment, thus explaining the significant volatility and variability in their prices. Because the total number of Bitcoins that would ever be issued is fixed (only 21 million will ever be created), new issuances are predetermined at a gradually decelerating pace.
“This limited supply has created a perverse incentive that encourages users to stockpile them in the hope that their prices rise. Unfortunately, with a conglomeration of desperate, disparate, and unregulated actors comes unprecedented price volatility that have threatened many sophisticated financial systems. In fact, the price of ether, one of the largest cryptocurrencies in the world, fell from US$320 to US$0.10 in June 2017. The price of Bitcoins has also suffered similar volatilities.
“Given that unlike Fiat money, which is accompanied by full faith and comfort of a country or Central Bank, cryptocurrencies do not have any intrinsic value and do not generate returns by themselves. When one buys a stock, say of a conglomerate in the Nigeria Stock Exchange, its price reflects the activity and production of that conglomerate and the value people place on their goods and/or services. This price may rise as the conglomerate produces better goods/services and probably gains greater market share.
“The reverse would be true if the conglomerate does not innovate to improve the quality of its goods/services. In other words, the price of that stock reflects market fundamentals. In contrast, , cryptocurrencies do not have fundamentals and would never have fundamentals. Investors only buy in the hope that its use and acceptability will rise, thereby pushing up its demand and price.But since new versions of cryptocurrencies come on stream with new mathematical models, an infinite supply may someday crash the price to zero.
CBN stressed that its actions are not in any way, shape or form inimical to the development of FinTech or a technology-driven payment system.
The apex bank said to the contrary, the Nigerian payment system has evolved significantly over the last decade, leapfrogging many of its counterparts in emerging, frontier and advanced economies propelled by reforms driven by the CBN.
The statement said this was evident from the variety of participants, products, channels, cutting-edge technology in the payments system.
CBN said the system was validated by the astronomical growth of volume/value of transactions and the fact that Nigeria is an investment destination of choice for international financial technology companies because of CBN’s policies that have created an enabling investment environment in the payments system.
[BREAKING] Arms fund probe: Finally, Army chief appears before Reps
The Chief of Army Staff, Lt.-Gen. Ibrahim Attahiru, is currently appearing before the House of Representatives’ Ad Hoc Committee on the Need to Review the Purchase, Use and Control of Arms, Ammunition and Related Hardware by Military, Paramilitary and Other Law Enforcement Agencies.
The committee had no less than two times invited Attahiru and Governor of the Central Bank of Nigeria, Godwin Emefiele, to answer questions on the procurement of arms and ammunition.
On Friday, the committee, after a long wait, postponed the investigative hearing till Monday.
Earlier on March 22, 2021, the committee had, after the failure by the CBN governor and the COAS to appear before it, summoned them to appear before on April 7, 2021.
BREAKING: Doctors suspend nationwide strike
Resident doctors have suspended their nationwide strike after 10 days.
Their president, Dr. Uyilawa Okhuaihesuyi, told The PUNCH on Saturday.
He said, “We suspended the strike about one hour ago. We are responsible to Nigerians, the government has acceded to some demands.”
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BREAKING: Gunmen raze another Imo police station
Gunmen on Tuesday razed the Ehime Mbano Local Government Area Divisional Police Headquarters in Imo State.
This development came just a day after unknown gunmen attacked Owerri Correctional Centre and the Imo State Police Command headquarters, freeing 1,884 inmates and razing over 50 vehicles.
Tuesday’s attack came few hours after the vice president, Yemi Osinbajo, the just sacked Inspector-General of Police, Muhammed Adamu, and other Government functionaries visited the state to inspect the level of damage on the attacked security facilities.
On arrival, the gunmen freed all the suspects in detention before setting the Police Divisional headquarters ablaze.
Our correspondent gathered that the gunmen operated without any resistance from policemen.
A source said, “Gunmen this evening razed Ehime Mbano LGA police divisional headquarters. On arrival, the gunmen freed the suspects before wrecking the havoc.”
A police spokesperson in the state, Orlando Ikeokwu, said that he could not confirm the development when he was contacted by our correspondent on Tuesday evening.
But a senior police officer who does not want his name in print said that the Command’s hierarchy was saddened by the latest development.
The PUNCH reports that gunmen had between February and March razed Obowo, Abo Mbaise, Ihitte/ Uboma and Isiala Mbano Divisional Police Headquarters, killings three cops and injuring others.
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