Growing Concerns Over Virtual Currencies

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Concerned about the growing popularity of virtual currencies in the country and the most recent advocacy for increased use of Bitcoin by popular online Ponzi scheme, MMM, the Central Bank of Nigeria last week cautioned financial institutions in the country on its use in transactions.

MMM, resuming after it froze accounts for a month had encouraged its subscribers to make use of Bitcoin for their transactions promising mouth-watering profits for those who use the virtual currency.

Virtual currencies such as Bitcoin, ripples and litecoin are software protocols or computer network that create value that is transferable from one person to another without a third party interference. Due to its nature. Transactions done on it can be hard to trace and even made untraceable when used for illicit purposes.

Noting that transactions in virtual currencies are largely untraceable and anonymous, the apex bank said due this quality of anonymity, it is often being abused by criminals, especially in money laundering, financing terrorism and other illicit businesses.

The circular called the attention of bank and other financial institutions to the risks saying “you are required to take the following actions actions pending substantive regulation or decision by the CBN.

“Ensure that you do not use, hold, trade and/or transact in any way in virtual currencies. Ensure that existing customers that are virtual currency exchangers have effective capital AML/CFT controls that enable them to comply with customer identification, verification and transfer, monitoring requirements.

“Where banks or other financial institutions are not satisfied with the controls put in place by the virtual currency exchanger/customers, the relationship should be discontinued immediately.

“Any suspicious transactions by these customers should immediately be reported to the Nigerian Finance Intellignece Unit (NFIU),” it said adding that virtual currencies such as bitcoin, ripples, monero, litecoin, dogecion, onecoin, etc., and similar products are not legal tenders in Nigeria. The apex bank further warned that anyone trading in bitcoin is doing so at his or her own risk.

“Thus, any bank or institution that transacts in such businesses does so at its own risk.” Bitcoin was the best performing currency of the year 2016. It has appreciated from four cents in 2010 to over $1,000 in 2017.

Last year, regulators and stakeholders in the Nigerian financial sector had set up a joint committee to look into the disruptive technology of virtual currency. The CBN and the Nigeria Deposit Insurance Corporation (NDIC) joint committee were to look into the effects of the crypto currency and other block chain technology go alerts in its effect on the Nigerian economy.

According to the Director, Banking and Payment System at the CBN, Dipo Fatukun, who is also the Chairman of Nigeria Electronic Fraud Forum (NeFF) said the forum is taking up measures to ensure that the crypto currency will not be a dark hole in which the Nigerian financial system will fall into.

Bitcoin has over the years gain popularity having served as a means of payment in the deep web and in recent times the currency requested by hackers. He however noted the need for regulators and operators in the Nigerian financial system to be well informed and not left out in the block chain technology.

The Managing Director and Chief Executive of NDIC, Ibrahim Umaru had earlier informed of a joint committee comprising of the corporation and the CBN which is currently looking into the emergence of the unconventional financial products.

The NDIC chief said the emergence of block chain platform such as Bitcoin is set to radically transform the banking industry noting that some banks in Europe have already adopted and introduced their own block hair products, compelling regulatory authorities to wake up to the changing trend.

Fatokun who described the block-chain technology as a disruptive technology, said the industry committee is looking into the technology and will “make recommendation so that when it becomes wide spread it is not going to be a dark hole that our system will fall into.

The CBN’s warning was triggered by concern for subscribers of MMM which recently posted a message on its site intimating its customers that it may be adopting the bitcoin in future transactions.

Te online Ponzi scheme in a statement on January 12 said “from now on, there is an opportunity for all of the participants of MMM Nigeria to acquire Mavro-50% when you provide help in Bitcoin.

“Mavro-50% work under the same rules as Mavro-30%. For example, all bonuses are rewarding to them according to the normal procedure. Bitcoin is an international digital currency. Bitcoin transactions take a few seconds and the transaction fee is charged very low ($0.05).

“Bitcoin does not belong to any government, companies or particular persons, which allows you to be independent from the banks and to manage your money as you want. MMM and Bitcoin strives to beat social inequality and to make the world more fair. With the help of Bitcoin MMM participants can provide financial help to each other worldwide,” it concluded

With the use of Bitcoin, participating in the Ponzi scheme become more risky as according to the Managing Director of the Nigeria Inter Bank Settlement System (NIBSS) Ade Shonubi, transactions done in virtual currencies are untraceable.

Noting that digital currency is “just a means of exchange and at one point you will change it to naira” he said “I am not aware CBN has come up with a frame work for anybody. So once you buy crypto currency, you cannot trace where it is going. It was a means to take money out in case CBN wants to start looking at who is taking the naira. And they (MMM) are offering people more interest once people change from naira to crypto currency, you cannot find those guys. You can’t trace them.


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