The Central Bank of Nigeria (CBN) is yet to release a documented regulatory framework for cryptocurrency after it restricted banks many months ago from carrying out transactions related to it.
Digital currencies have been around for over 10 years but lately, how to regulate these crypto assets have risen to be the top policy agenda.
Some Nigerians are still trying to rebound from the financial shock that occurred on February 5, 2021, as players who considered cryptocurrency to be one of the most dependable legitimate means of making a living were taken aback.
In February, the apex bank instructed that all customer accounts used in cryptocurrency trading and other related transactions be closed.
Prior to the Nigerian government’s decision to prohibit banks from conducting crypto-related transactions, the Independent Corrupt Practices and Other Related Commission, ICPC, informed lawmakers that the #EndSARS received financial assistance via cryptocurrency.
EndSARS was a decentralized social movement and a series of mass protests in Nigeria against police brutality and was largely funded through Bitcoin – the most popular crypto asset in the world.
The movement attracted N147,855,788.28 M (including donations in dollars, Euros, Bitcoin, and other currencies), while an estimated N700bn was lost in economic value by Nigeria, according to the Lagos Chamber of Commerce and Industry.
Understandably, among all the reasons listed by the Nigerian government to restrict banks from facilitating cryptocurrency transactions were majorly money laundering and terrorism.
CBN & SEC Collaboration
The CBN is yet to establish a road map for blockchain and cryptocurrency regulation but has formed a committee to that effect while collaborating with the Securities and Exchange Commission (SEC).
The Securities and Exchange Commission (SEC) is the main regulatory institution of the Nigerian capital market.
According to the regulator, it was collaborating with the CBN to analyze and better understand the identified cryptocurrency risks in hopes of guaranteeing those appropriate regulations are in place if cryptocurrency transactions are authorized in the future.
“We are in discussion with CBN for both understanding and better regulating of this market. We will be able to come back to you later to inform you of the outcome of these engagements, said Director-General, SEC, Lamido Yuguda, said at the 2021 first post-Capital Market Committee (CMC) virtual news conference.
The SEC had issued regulatory guidelines for digital currencies and crypto-based companies or startups, indicating that they will supervise crypto-token or crypto-coin investments where the nature of the investments qualifies as securities transactions.
“But because of the lack of access to commercial bank accounts, we had to suspend our guidelines of September 2020, the implementation of that circular is suspended until these operators can have access to Nigerian bank accounts.
“Remember that nobody operates in the Nigerian capital market if that person does not have access to a Nigerian bank account,” he said.
According to the Commission, it will regulate cryptocurrency innovation in three ways: safety, market deepening, and providing solutions to issues that will lead to its regulations, strategy, and interactions with innovators seeking legitimacy and significance in this growing industry.
Nigeria’s Payments System 2025
The “Nigeria’s Payments System 2025,” report obtained by TechEconomy noted it will issue a regulatory policy framework for the execution of cryptocurrencies in Nigeria.
The report clearly stated that CBN would consider the development of a regulatory framework for the potential six implementations of ‘Stable Coin. It would also continue its watchful brief on Initial Coin Offerings (ICOs) as well as work with the Securities Exchange Commission (SEC) to jointly develop a regulatory framework in the event of the adoption of an ICO-based investment solution.
Regulating Cryptocurrency
According to the International Monetary Fund, applying existing regulatory frameworks to crypto assets, or developing new ones, is challenging for several reasons.
“For a start, the crypto world is evolving rapidly. Regulators are struggling to acquire the talent and learn the skills to keep pace given stretched resources and many other priorities.
“Monitoring crypto markets is difficult because data are patchy, and regulators find it tricky to keep tabs on thousands of actors who may not be subject to typical disclosure or reporting requirements.”
On December 18, 2022, the Chairman of the House of Representatives Committee on Capital Markets and Institutions, Babangida Ibrahim, disclosed that the chamber will soon pass a law that will allow digital currencies in Nigeria.
“It is not about the lifting of the ban, we are looking at the legality: what is legal and what is within the framework of our operations in Nigeria,” he said.
“When it comes to digital currencies, they have different names and it depends on the jurisdiction. These currencies, don’t have boundaries. You can stay here in Nigeria and invest in the United States, Canada, or anywhere.
“They are digital. That is why – if you remember – when cryptocurrency was initially banned in Nigeria, the CBN discovered that most of these investors don’t even use local accounts. So, they are not within the jurisdiction of the CBN. Because they are not using local accounts, there is no way the CBN can check them.
“All these are some of the issues that we have considered we have to regulate them. It is not that they are illegal but we don’t have regulations for them. So, these are some of the reasons why we need to review the Act and put some regulations for most of the activities – derivatives, commodity exchanges, digital currencies, and so many other things.
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