BEVERLY HILLS, February 05, (THEWILL) – The Central Bank of Nigeria (CBN) has, again, warned against any dealings in cryptocurrencies declaring such transactions as prohibited.
This is coming on the heels of similar policy action by the Indian government banning transactions in private cryptocurrencies.
Both countries have, in separate statements, reiterated their oppositions against digital currencies which are in use in many parts of the world.
While Nigeria declares the use of virtual currencies as illegal, India has commenced moves to create its official virtual currencies backed by law and issued by the Reserve Bank of India.
The CBN had in a circular coded BSD/DIR/GEN/LAB/14/001, dated February 5, 202, drewn attention to its earlier circular in January 2017, warning against the use of cryptocurrencies by banks and other financial institutions.
The CBN circular and jointly signed by the Director, Banking Supervision, Bello Hassan and the Director, Payments System Department, Musa Jimoh, warned that strict sanctions will be applied for any violation of the directive.
The apex bank, therefore, ordered banks and other financial institutions to freeze customer accounts used in trading cryptocurrencies and other related transactions.
The apex bank in the circular cautioned the banks and other financial institutions on the risks associated with transactions in cryptocurrency ordering them to desist from facilitating payments for cryptocurrency transactions.
It also directed them to identify entries transacting and operating crypto-currency exchanges within their systems and ensure that such accounts are closed immediately.
The circular reads in part, “Further to earlier regulatory directives on the subject, the Bank hereby wishes to remind regulated institutions that dealing in crypto-currencies or facilitating payments for crypto-currency exchanges is prohibited.
“Accordingly, all DMBs, NDFIs and OFIs are directed to identify persons and entities transacting in or operating crypto-currency exchanges within their systems and ensure that such accounts are closed immediately.”
Reuters had reported in January 2021 that India planned to introduce a law to ban private cryptocurrencies such as bitcoin and put in place a framework for an official digital currency to be issued by the central bank.
It said the move would “create a facilitative framework for creation of the official digital currency to be issued by the Reserve Bank of India (RBI)”, quoting the agenda published on the website of Indian legislative lower house.
A cryptocurrency is a digital currency that can be used to buy goods and services, but uses an online ledger with strong cryptography to secure online transactions.
Much of the interest in these unregulated currencies is to trade for profit, with speculators at times driving prices in an upward manner.
Governments around the world have been looking into ways to regulate cryptocurrencies or have it banned totally.
The Nigerian government in 2018, through the CBN and the Nigerian Deposit Insurance Corporation (NDIC), cautioned against investments in cryptocurrencies, stressing that virtual currencies are not legal tender in Nigeria.
The then CBN Spokesman, Mr Isaac Okoroafor, had emphasized that dealers and investors in any kind of cryptocurrency in Nigeria were not protected by law, thus may be unable to seek legal redress in event of failure of the exchangers or collapse of the business.
India, on the other hand mulls legislative approval for official cryptocurrencies while private transactions in virtual currencies remain banned, a move opposed by the Reserve Bank.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
