Should cryptocurrency be banned in Nigeria?

The surge in conversations surrounding cryptocurrencies is not completely surprising as this class of assets which were of little to no value in 2009 when the world’s first cryptocurrency “Bitcoin” was created, are now estimated to be worth approximately $36,000 per crypto-unit.

With the rapidly growing popularity of cryptocurrencies as a trading instrument across the world, a major point of interest and concern for most people in relation to cryptocurrencies is the mode of regulating them, especially in consideration of their unconventional nature.

Cryptocurrencies which are decentralized digital currencies can be used in purchasing goods and services and can also be traded for profit making purposes.

Being decentralized means, cryptocurrencies are not subject to supervision/management by a central bank, as with traditional currencies.

Rather, cryptocurrency transactions are carried out through blockchain technology. Blockchain technology is a decentralized processing and recording platform which is shared and can be accessed by different computers simultaneously for the purpose of cryptocurrency related transactions.

Furthermore, blockchain technology is mainly characterized as being a highly secure and transparent network which locks out any form of interference by third parties in the chain of events or transactions.

The decentralized nature of the cryptocurrency system is arguably its focal feature and has also been posited to be one of its major advantages.

But despite the claim of cryptocurrency being secured and free from criminal transactions, the Central Bank of Nigeria in 2021 banned cryptocurrency-related transactions in the country, claiming the digital currency is used for money laundering and terrorism.

The apex bank said in a statement days after affirming a 2017 directive to financial institutions to block cryptocurrency accounts.

Though, the ban sparked outrage from mostly young people in Nigeria that is the world’s second-biggest user of virtual currencies like Bitcoins.

But seven months after President Bola Tinubu took over the baton of leadership in 2023, Nigeria’s central bank lifted ban on transacting in cryptocurrencies, while saying global trends had shown a need to regulate such activities, the bank said in its circular.

Subsequently Nigeria’s Securities and Exchange Commission (SEC) in May last year published regulations for digital assets that signalled Africa’s most populous country was trying to find a middle ground between an outright ban on crypto assets and their unregulated use.

In a circular dated Dec. 22, the CBN said current trends globally have shown there is a need to regulate the activities of virtual asset service providers (VASPs), which include cryptocurrencies and crypto assets.

The guideline outlined how banks and financial institutions (FI) should open accounts, provide designated settlement accounts and settlement services and act as channels for forex inflows and trade for firms transacting in crypto assets.

However, it appears that the guideline outlined by the apex bank to regulate crypto-related transactions could not do much to weed out criminal activities in the system.

Recently, following the free fall of Naira, President Bola Tinubu’s administration accused Binance, a crypto trading platform of economic sabotage.

Tinubu’s Special Adviser on Information & Strategy, Bayo Onanuga while speaking during an interview on Channels Television, said that the cryptocurrency trading website, Binance will destroy Nigeria’s economy if it’s not clamped down.

Onanuga alleged that Binance is arbitrarily fixing the foreign exchange rate.

He said, “If we don’t clamp down on Binance, Binance will destroy the economy of this country. They just fix the rate. We have saboteurs. Look at what Binance is doing to our economy.

“That is why the government moved against Binance. Some people sit down using cyberspace to dictate even our exchange rate, hijacking the role of the CBN.

“They just sit down and fix anything they like. It’s a sabotage and we are trying to prevent that from happening henceforth.”

Also, on Thursday, two Binance top executives were arrested by security operatives in Nigeria.

They had visited Nigeria following the government’s ban on several cryptocurrency trading platforms.

The two top officials were immediately taken into custody according to Financial Times, by the office of the national security adviser, with their passports seized.

Their detention highlight the escalating tensions between Nigerian government and the crypto market, which has become rendezvous for speculative trading on the naira.

The Central Bank of Nigeria governor, Olayemi Cardoso, cited Binance in a recent press conference. He expressed concerns over the illicit and suspicious financial flows through crypto platforms.

According to Cardoso, an alarming $26 billion has been transacted through Binance Nigeria in the past year. This has raised eyebrows over the sources and users involved in these transactions.

Meanwhile, as the debate keep raging on whether cryptocurrency should be completely banned in Nigeria, Diaspora Digital Media (DDM) in a recent editorial called on cryptocurrency platforms to subject themselves to rigorous regulation by an independent financial regulatory agency.

According to DDM, only through complete transparency and accountability can the potential benefits of cryptocurrencies be realized without compromising the stability and security of Nigeria’s financial system.

It said, “In a radical departure from conventional laissez faire narrative, the debate over the fate of cryptocurrencies in Nigeria leans heavily towards advocating for a ban, unless cryptocurrency platforms commit to comprehensive regulation and transparency in their operations.

“The recent revelation of $26 billion passing through Binance Nigeria from undisclosed sources underscores the urgent need for drastic measures to curb illicit activities and protect Nigeria’s financial integrity.

“Therefore, cryptocurrency platforms must subject themselves to rigorous regulation by an independent financial regulatory agency.

“Only through complete transparency and accountability can the potential benefits of cryptocurrencies be realized without compromising the stability and security of Nigeria’s financial system.

“It’s time for a radical shift towards proactive regulation to ensure that cryptocurrency transactions align with the nation’s economic interests and aspirations.”

“Collaboration between regulatory agencies like the CBN, Securities and Exchange Commission (SEC), and law enforcement bodies is essential to address these concerns effectively.

“Ultimately, a balanced approach that combines regulation, oversight, and technological innovation may be necessary to harness the potential benefits of cryptocurrencies while mitigating associated risks.”