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CBN: Why We Ban Crypto Currency In Nigeria
~3.2 mins read
The Central Bank of Nigeria (CBN) has reacted to condemnations trailing the directive to Deposit Money Banks (DMBs) to desist from
transacting in cryptocurrencies.
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
transacting in cryptocurrencies.
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
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NM01
How Small Businesses Are Taking The Hit On Twitter Ban
~2.3 mins read
Some small businesses that rely on Twitter for survival are finding it tough to cope as a result of the indefinite suspension imposed on the operation of the micro blogging site by the Federal Government. Chief Executive Officer (CEO) of JE Stores, Jadesola Praise, said her sales had dipped since the ban was imposed because she depends on the platform to reach her customers. According to her, JE Stores is a virtual shop that deals in unisex wears, sneakers, bags, slides, writs watches and others with nationwide delivery. “My sales have been affected. I am hopeful that the government and Twitter will reach an agreement soon so that the nightmare will come to and end,†she said. Also, a Lagos-based entrepreneur, Ogechi Egemonu, said she was selling more than N500,000 worth of watches, shoes and handbags on Twitter weekly. Now, with the site suspended by the government, Egemonu does not know how she will cope. “Social media is where I eat. I depend on social media for my livelihood,†she told Reuters. Praise and Egemonu are few of the several small, medium enterpriseses (SMEs) in the country that have been affected by the indefinite suspension of the micro-blogging platform. The Federal Government had on June 4, announced the “indefinite†suspension of Twitter over “the persistent use of the platform for activities that are capable of undermining Nigeria’s corporate existenceâ€. It came days after the platform President Muhammadu Buhari’s post threatening to punish secessionist agitators. He said that a “sizeable number of citizens†use Twitter to make a living. Parliament’s minority caucus warned the suspension was costing Nigerians “billions of naira on a daily basis.†Dumebi Iyeke, a research analyst with the Financial Derivatives Company, said it would hit young Nigerians – among whom there is a 45 per cent unemployment rate – the hardest. “We are looking at a potential loss in their revenue,†Iyeke said, adding that it could further lower living standards amid high inflation. Information Minister Lai Mohammed last week said that all social media sites must register a local entity and get a license to operate. He cited complaints over lost money as proof that the ban was effective, but said other sites are still available. “Section 2(1) r of the NBC Act entrusts the Commission with responsibility to ensure strict adherence to the national laws, rules and regulations,†the DG said. “Section 3.11.2 of the Nigeria Broadcasting Code provides that ‘the broadcaster shall ensure that law enforcement is upheld at all times in a matter depicting that law and order are socially superior to or more desirable than Crime and Anarchy.†“Attention is also drawn to section 5.6.3 of The Code which requires Broadcasters to be mindful of materials that may cause disaffection, incite to panic or rift in the society in the use of a user generated Content (UGC). “Note that it will be unpatriotic for any broadcaster in Nigeria to continue to patronise the suspended Twitter as a source of its information therefore strict compliance is enjoined.†|
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