Stella Dimoko Central Bank Of Nigeria Explains Why It Banned Cryptocurrency


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Monday, February 08, 2021

Central Bank Of Nigeria Explains Why It Banned Cryptocurrency

The Central Bank of Nigeria (CBN) has reacted to condemnations trailing the directive to Deposit Money Banks (DMBs) to desist from transacting in cryptocurrencies.

In a statement on Sunday, Osita Nwanisobi, Acting Director, Corporate Communications, clarified that the CBN circular of February 5, 2021 did not place any new restrictions on cryptocurrencies.

He recalled that all banks in the country had earlier been forbidden, through CBN’s circular dated January 12, 2017, not to use, hold, trade and/or transact in cryptocurrencies.

Nwanisobi noted that the CBN’s position on cryptocurrencies is not an outlier as many countries, central banks, international financial institutions, and distinguished investors and economists have also warned against its use.

He said China, Canada, Taiwan, Indonesia, Algeria, Egypt, Morocco, Bolivia, Kyrgyzstan, Ecuador, Saudi Arabia, Jordan, Iran, Bangladesh, Nepal and Cambodia have all
placed certain level of restrictions on financial institutions facilitating cryptocurrency transactions.

CBN said in China, cryptocurrencies are completely banned and all exchanges closed as well.

Nwanisobi said even famed investor Warren Buffett has called cryptocurrencies “rat poison squared,” a “mirage,” and a “gambling device.”

“Mr. Buffett believes it is a “gambling device” given that they are mostly valuable because the person buying it does so, not as a means of payment; but in the hope they can sell it for even more than what they paid at some point.

During an online forum hosted by the Davos-based World Economic Forum few weeks ago, Andrew Bailey, the Governor of the Bank of England, highlighted the extreme price volatility of cryptocurrencies as one of the biggest flaws and explained that this flaw makes it impossible for them to be used as a lasting means of payment.

“It is not surprising he would take that position because, Bitcoin, the best-known cryptocurrency, hit a record high of $42,000 per unit on January 8, 2021, and sank as low as $28,800 about two weeks later. This is far greater volatility than is found with normal currencies.”

CBN listed the justifications for CBN’s recent policy reminder.

Nwanisobi said first, in light of the fact that they are issued by unregulated and unlicensed entities, their use in Nigeria goes against the key mandates of the CBN, as enshrined in the CBN Act (2007), as the issuer of legal tender in Nigeria. In effect, the use of cryptocurrencies in Nigeria are a direct contravention of existing law.

He highlighted the critical between a Central Bank issued Digital Currency and cryptocurrencies, adding that as the names imply, while Central Banks can issue Digital Currencies, cryptocurrencies are issued by unknown and unregulated entities.

“Second, 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.

“Indeed, many banks and investors who place a high value on reputation have been turned off from cryptocurrencies because of the damaging effects of the widespread use of cryptocurrencies for illegal activities. In fact, the role of cryptocurrencies in the purchase of hard and illegal drugs on the darknet website called “Silk Road” is well known. They have also been recent reports that cryptocurrencies have been used to finance terror plots, further damaging its image as a legitimate means of exchange.

“More also, 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. Because the total number of Bitcoins that would ever be issued is fixed (only 21 million will ever be created), new issuances are predetermined at a gradually decelerating pace.

“This limited supply has created a perverse incentive that encourages users to stockpile them in the hope that their prices rise. Unfortunately, with a conglomeration of desperate, disparate, and unregulated actors comes unprecedented price volatility that have threatened many sophisticated financial systems. In fact, the price of ether, one of the largest cryptocurrencies in the world, fell from US$320 to US$0.10 in June 2017. The price of Bitcoins has also suffered similar volatilities.

“Given that unlike Fiat money, which is 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. This price may rise as the conglomerate produces better goods/services and probably gains greater market share.

“The reverse would be true if the conglomerate does not innovate to improve the quality of its goods/services. In other words, the price of that stock reflects market fundamentals. In contrast, , cryptocurrencies do not have fundamentals and would never have fundamentals. Investors only buy in the hope that its use and acceptability will rise, thereby pushing up its demand and price.But since new versions of cryptocurrencies come on stream with new mathematical models, an infinite supply may someday crash the price to zero.

CBN stressed that its actions are not in any way, shape or form inimical to the development of FinTech or a technology-driven payment system.

The apex bank said to the contrary, the Nigerian payment system has evolved significantly over the last decade, leapfrogging many of its counterparts in emerging, frontier and advanced economies propelled by reforms driven by the CBN.

The statement said this was evident from the variety of participants, products, channels, cutting-edge technology in the payments system.

CBN said the system was validated by the astronomical growth of volume/value of transactions and the fact that Nigeria is an investment destination of choice for international financial technology companies because of CBN’s policies that have created an enabling investment environment in the payments system.

from dailypost.


  1. God punish nna,both the CBN and the Govt....always looking up more ways daily just to fraustrate Nigerians...leave ppl to encounter whatever risk involved;is it not their money? Did ppl not loose money when so many Banks Oceanic Bank etc crashed.
    Have you idiots done anything about dollar dat is now above N500. Mschewww

  2. #EndSWAT #Endpolicebrutality Phoenix8 February 2021 at 09:46

    But CBN this thing you are doing is not in your jurisdiction but SEC- security and exchange comission. SEC should give sdvisory on investments such as cyptocurrency and blockchain technology. CBN is just being intellectually lazy and would go through the no brainer route of BAN. The truth is how can you regulate or ban what you cant
    control. How about identifying cypto traders and license them. Because other countries banned or restrict them does not mean you should follow suit. Look at pecularities in your environment and see how to formualte policies that will conform to them. We need young enlightened people in CBN not stoic rigid people who dont want to explore the benefits of technology on finance or investments. That is why its so hard for people to come invest in Nigeria becos of draconian policies like this. Cyptocurrency is like water, it will find its way

  3. This administration is always and quick to mention other countries as example when they mis behave but will not copy the countries to look after her citizens.

    We will survive this wicked regime.

  4. Another fruitless decision... we will still find a way to trade crypto!!! Abi we have found a way sef, I laugh in p2p 🀣🀣🀣 A failed govt that is looking for every means to redeem themselves

  5. This government is run by insane could you just wake up and make such decision?
    We deserves better than what we are getting,Nigerians are smart people, we should never settle 4 less,mediocrity should not be an option when choosing leaders

    1. They did not just wake up. They have been warning banks to stay away from crptocurrency since 2017. You people only care about gossips, you don't read. CBN did not stop anybody from trading cryptocurrency, all they did was ask the banks to stay away. Nigeria is the second largest crpto market, trading $200-$300 million dollars per year, that is about a billion dollars every month. Where is the money coming from, it is definitely not from Nigerians who have been ranting and crying in the last 3 days. France, Germany and the UK are economic power houses, how on earth are Nigerians buying more crpto than citizens of those power houses. Obviously illicit money, proceeds of crime are deployed by Nigerians. In the third quarter of last year Nigerians living abroad sent home $2 billion dollars through cryptocurrency denying CBN of the needed dollars. Last year a group of criminals hacked the customer data of a bank in Nigeria, they refused to negotiate in naira and dollars. They insisted the negotiation must be in bitcoin. According to Thisday newspaper, reports by FBI shows criminal elements are using crptocurrency for money laundering and sponsoring terrorism. Again, CBN did not ban crytocurrency, it is just that you can't use your bank accounts for that purpose. There are several platforms you can use for your trade. Stop the noise

    2. @Alexander all the points stated are true..Even if you wanna buy arms and ammunition in the black market; you will need money not everyone will use bitcoin..My own is CBN has never published those who have been sponsored boko haram, kidnappers collecting ransoms and co..Yes CBN said don't use the banks but it will not stop there..The thing is Nigerian leaders are very lazy, they dont want to learn and see how to navigate about this blockchain technology but just BAN! BAN!! BAN!!..This is an industry they should see how they can make the most out of it...Period!!

    3. @Alexander, thanks for spelling it out. Many Nigerians jump and scream with this herd mentality of not knowing why some rules exist.

    4. Alternative Facts8 February 2021 at 17:43

      Alexander, it still doesn’t justify outrightly banning crypto currencies! Why not investigate and identify the culprits involved. An entire institution cannot bend to the whims of criminals who are always in the minority.
      The CBN should stop deceiving Nigerians. Elon Musk and Tesla just invested $1.5 billion in bitcoin.
      Visa is introducing crypto currency trading on its network.
      Paypal has launched a business unit dedicated to crypto currency. These are industry leaders.

  6. Advanced countries havent even gone this route.... na this village Nigeria, they think they have sense or they're fooling the public

    1. I just tired 😫 for this sick backward country.

    2. Village is your country, will always be till death. Of the $200-$300 million dollars Nigerians trade per week ,how much is yours. It is the responsibility of CBN to regulate all financial institutions in Nigeria, that's exactly what the apex bank just did. Sick backward country is your part of the country.

  7. Nigerians like MMM, right
    Crypto is just the younger son of MMM
    and they don't care as long as it is quick gains.
    😏😏😏😏😏😏anything quickie will do for them

  8. But people can still continue crypto transactions

  9. A sick country is one populated by airheads, and ruled by blockheads.


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