Banks vs Bitcoin

The directive, which was widely shared on social media, provoked a variety of comments and reactions from Nigerians, the majority of whom were concerned about its implications for cryptocurrency trading in Nigeria. In response, on 7 February 2021, the CBN published a five-page press release to justify the central bank’s position to the general public and to reiterate that the anti-cryptocurrency policy had been in existence since 2017. Essentially, the CBN’s position on cryptocurrencies is that the anonymous, unaccountable, unregulated and volatile nature of cryptocurrencies exposes investors, traders, and associated financial institutions that interact with such currencies to significant financial and cyber risks. Additionally, the CBN stated that the use of cryptocurrencies in Nigeria goes against the key mandates of the CBN as the issuer of legal tender in Nigeria (a role enshrined in the CBN Act of 2007). Consequently, the CBN argued, the use of cryptocurrencies in Nigeria is a direct contravention of existing law.

According to the deputy governor of the CBN, Aishah Ahmad Ndanusa, the central bank banned the use of cryptocurrencies only within the banking system. This means that Nigerians can still trade cryptocurrencies, but they are not allowed to deposit or withdraw money in currency exchanges or retail trading platforms through domestic DMBs, NBFIs and OFIs.

Moreover, the CBN explained that ‘the recent regulatory directive became necessary to protect the financial system and the generality of Nigerians (including the youth population) from the risks inherent in crypto assets transactions, which have escalated in recent times, with dire consequences for the integrity of the financial system and financial stability.’ However, the CBN’s directive only mandated that financial institutions in Nigeria may not use, hold, trade and/or transact in cryptocurrencies, without including any risk mitigation strategies to address said risks. Evidently, the CBN’s policy is closer to prohibition than regulation and while the policy may have a variety of consequences for Nigeria and Nigerians, the policy ultimately serves to protect the interests of the Nigerian government vis-à-vis the financial system.