While countries like Nigeria are still not in contention to adopt cryptocurrency as a legal tender; countries like the Central African Republic and El Salvador have all adopted bitcoin as their official currency.
Digital currencies are currently restricted as banks are not allowed to facilitate any transaction after the Central Bank of Nigeria raised several legitimate concerns bordering on fraud, terrorism financing, money laundering, etc.
“Cryptocurrencies like Bitcoin or Ethereum are not legal tenders. They are just commodities,” Professor Kareem Adebayo Olatoye, Faculty of Law, Lagos State University, said during a BusinessDay Conference on the “Future of Payments and Fraud” in Lagos.
Professor Olatoye, while delivering a joint paper titled “The Role of Law in Mitigating Fraud in the Digital Payment System”, said the United States of America understands the volatile nature of digital currency; hence, it’s seen and treated as a commodity.
He warned that cryptocurrencies pose a serious threat to the economy if adopted as legal tender.
“Cryptocurrency can bring down the economy overnight.”
Professor Olatoye agrees that digital payment is the future of payment, however, highlights some of the vulnerabilities.
“Money laundering, theft of identity, fraud, cybercrimes are all dangers digital payments will pose in the future.”
On the restrictions posed by the Central Bank of Nigeria on cryptocurrency transactions, Professor Olatoye said effective regulation was sacrosanct. “Mitigating fraud and ensuring cybersecurity is critical.
He said the CBN is coming up with a robust policy framework, adding that the present laws available are not enough to control the level of fraud that will be associated with payments in the future.
During a panel session, Emmanuel Babalola, Chief Executive Officer, Bundle Africa, said the idea behind cryptocurrency was not for it to become a legal tender; it was basically meant to be a vehicle to move values easily.
“Digital currency is just a step away from the evolution of money.”
He explained that instead of buying houses that could be easily demolished, it was easier for people to just use a huge sum of money to buy digital currencies that can be accessed anywhere in the world as long as you have access to your wallet.
In a note seen by TechEconomy, International Monetary Fund (IMF) said in June 2021 that legal tender status requires a means of payment.
“However, internet access and technology needed to transfer crypto-assets remains scarce in many countries, raising issues about fairness and financial inclusion.”
“Adoption of cryptocurrency as a national currency is probably not appealing to countries with stable inflation and exchange rates and credible institutions. For countries with less stable economies, a better option could be to use an internationally recognized reserve currency such as the dollar or euro.”
The IMF said some countries may be tempted by the “shortcut” of making crypto legal tender to foster cheaper and more inclusive financial services.
The bottom line is that governments need to be the ones to provide these services and take advantage of new digital forms of money, the note explained.