Last Friday, the Central Bank of Nigeria (CBN) reiterated that financial institutions in the nation have been banned from accepting cryptocurrency transactions.
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This is in line with a 2017 Circular that states that Bitcoin and other cryptocurrencies are not legal tender in the country.
With the aim to justify its decision following the array of criticisms that trailed the directive, the Apex bank had identified 4 reasons for its decision.
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Why Does CBN Outlaw Bitcoin, other Cryptocurrencies?
UNREGULATED AND UNLICENSED ISSUERS
According to the Apex bank, cryptocurrencies are issued by unregulated and unlicensed entities. This according to CBN is a “direct contravention” of the “key mandates of the CBN, as enshrined in the CBN Act (2007).
ANONYMITY & OBSCURITY
It’s incontrovertible that cryptocurrency is an anonymous financial system. Literally, the term ‘cryptocurrency’ suggests secrecy.
According to the CBN:
“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.”
CRYPTOCURRENCIES ARE SPECULATIVE ASSETS
CBN has noted that cryptocurrencies are speculative assets rather than as a means of transaction.
“… 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…”
CRYPTOCURRENCIES LACK INTRINSIC VALUE
The Apex Bank also noted that cryptocurrencies do not have intrinsic value and do not generate returns by themselves.
“Given that unlike Fiat Money which 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. Given that unlike Fiat Money which 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.”
