Why ban on $600m cryptocurrency market may be short-lived

The argument for and against the ban of transactions in cryptocurrency has engulfed Nigeria’s financial sector in the past few weeks.

The Central Bank of Nigeria on February 7th directed commercial banks to a shutdown cryptocurrency account of all customers across the country.

However, the the directive was greeted by wild condemnation, as the ban came at a time where trading bitcoin is gaining huge momentum in the international market.

As such, there were mounting pressures on regulatory agencies to rescind their decision despite the Central Bank governor declaring that the decision was in the best interest of Customers.

Also, the Securities and Exchange Commission had last year issued a framework on Crypto-Currency regulation in the country. But last week, backtracked and backed the apex bank decision on Cryptos.

SEC had said that the CBN ban was consistent with its regulation as both parties were finding ways of securing investors and protecting the financial ecosystem of the country.

However, Nigeria is not the only country that had clamped down on Cryptos, as the European Union Central Bank last month accused Bitcoin of aiding money laundering and called for global regulation of crypto-currencies.

Also, the United States Securities and Exchange Commission had in January warned investors against “too-good-to-be-true opportunities” in the cryptocurrency space.

Meanwhile, estimates from a survey data platform, Statista showed that Nigerians have traded nearly $600 million in Bitcoin in the last five years, making it the secondlargest Bitcoin market after the United States.

Commenting on this, a cryptocurrency enthusiast, Ola Aina said that the ban won’t last stated that “We are having an enormous amount of currency restriction. People who want to trade are not able to buy dollars or foreign exchange to import the items which is the reason people have turned to cryptocurrency to remedy the problem and now the CBN wants to ban it, I think it’s just temporary.”

Aina added that if the ban is sustained, it will most likely make the situation worse and lead to a further fall in revenues, adding that cryptocurrency enthusiasts will find a way around the ban.

“It’s going to be around a couple of days or a week to circumvent this policy. In this case, we may not have to use banks, and at the end of the day, it’s the banks’ loss.”

Given the weighty nature of the directive, I want to believe that the CBN must have consulted relevant stakeholders including the Bankers Committee before taking the decision. I am inclined to believe that it was well thought through and not a unilateral decision.

Also, a finance expert and President, Association of Capital Markets Academics, Prof. Uche Uwaleke assert that the directive should be seen in the light of the fact that the CBN may have information that may not be available to the public.

According to him, the flaw in that circular is that it did not state the reason why the apex bank is taking that course of action.

It should have done so especially if it’s to do with fraudulent activities and threats to financial system stability.

“Recall that not too long ago at some point, China, widely seen as the home of Cryptocurrencies had to ban trading in bitcoins. “I believe this measure is only temporary.

Given that cryptos have come to stay, the CBN and the SEC should come up with a regulatory framework for crypto asset trading in Nigeria”, he said.

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Ogbonna Ugorji

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