In January 2017, the Central Bank of Nigeria (CBN) warned Nigerians and financial institutions to stay away from virtual currencies that have attracted investment in payments infrastructure that provides new methods for transmitting value over the internet.
The CBN had reiterated that virtual currencies such as Bitcoin, Ripples, Monero, Litecoin, Degecoin, OneCoin among similar products are not legal lenders in Nigeria, thus any financial institution that transacts in such businesses does so at its own risk.
As at the time of writing this report, bitcoin, a world known cryptocurrency, has continued to crash as investors globally are getting their fingers burnt. After the bitcoin craze rose to a near-fever pitch in 2017, several investors and analysts this year are predicting more growing pains for cryptocurrencies over surge in speculations and governments placing ban.
Interestedly, as bitcoin price has stagnated in the last two weeks, smaller digital currencies such as Ripple, Stellar and Tron have surged into the ranks of the largest cryptocurrencies by market capitalization. Bitcoin saw its highest value before the Christmas holidays when it reached the staggering price of just below $20,000 but valued at $14,815.88 as at last week, according to CoinDesk.
Checks by LEADERSHIP revealed that one bitcoin equals an estimated N6 million as at January 5, 2018 as more Nigerian youths on MMM are taking interest in investing in virtual currencies, bitcoin specifically. Financial experts have joined regulating bodies to discourage investors to buy and trade with bitcoin due to its incredible volatility.
Most of them are of the opinion it is a bubble ready to burst this year. They expressed that as governments tighten their grip, bitcoin prices will most likely fall, and perhaps collapse, though the timing is impossible to judge. Bitcoin seems too prone to illicit use and too vulnerable to government regulation to survive for the long term.
They hinted that, “contrary to the attestation of its proponents, bitcoin contains several flaws that foretell its eventual doom. “The crux of his argument is that once central banks begin to view bitcoin as a credible threat, governments will declare war on cryptocurrency and suppress it out of existence through hostile regulatory policies.”
One of the most highly-regarded economists in the US said that he believes the bitcoin price is in a bubble and will “likely burst” over the long-term, even if it continues to appreciate in the short-term. Last year, Nigeria key market regulating bodies, CBN, Securities and Exchange Commission (SEC) and Nigeria Deposit Insurance Corporation (NDIC) were increasingly vocal in warning investors about the risks of cryptocurrencies.
For instance, the CBN said virtual currencies are largely used in terrorism financing and money laundering, considering the anonymity of virtual transactions. The director, financial policy and regulation department, CBN, Mr. Kevin Amugo in a signed document said, transactions in virtual currency are largely untraceable and anonymous making them susceptible to abuse by criminals, especially in money laundering and financing of terrorism.
“Virtual currencies are traded in exchange platforms that are unregulated, all over the world. Consumers may there lose their money without any legal redress in the event these exchangers collapse or close businesses. The attention of bank and other financial institutions is hereby drawn to the above risks and you are required to take the following actions pending substantive regulation or decision by the CBN,” the statement read.
According to him, actions that needs to be taken by financial institutions include: “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 Intelligence Unit (NFIU).”
The apex bank said anyone trading in bitcoin is doing so at his or her own risk. Bitcoin was the best performing currency last year. It has appreciated from four cents in 2010 to over $19,000 in 2017. On January 8, 2017 when MMM Nigeria announced its planned comeback, it introduced bitcoin as a mode of payment.
Prior to the freeze of MMM, participants were allowed to provide help in bitcoin, but they were paid back in naira. However, the new plan allows participants to receive payment in bitcoin, and watch their monies grow in bitcoin. “Due to the recent sharp price fluctuations of Bitcoin, MAVRO-BTC is being introduced in the system,” MMM said.
“So far, we have only had Mavro-Naira in the System. Even though you provided help via Bitcoin, your Bitcoins, anyway, were recalculated into the Nigerian Naira at the exchange rate at the moment of providing help, and you were credited with Mavro-Naira in your PO.
“It was the naira amount that grew. In other words you received 30 per cent a month specifically in the naira (not in Bitcoins, although you originally provided help using Bitcoins). Now, you have a chance to have 30 per cent growth of the Bitcoin amount, not the naira amount.
“So, acquire MAVRO-BTC which will be credited in your PO and will grow at a 30 per cent monthly growth rate. In a month not only 30 per cent will be added to your initial amount, but it can increase itself due to Bitcoin price growth,” MMS said then.
However, Deputy Director, banking and Payments System, CBN, Mr. Musa Itopa-Jimoh had explained that apex bank has never wanted to stop bitcoin usage in Nigeria. According to him, “We have never been issuing authority for bitcoin. It’s not our currency. We neither control nor issue bitcoin. What we do is only cautioning Nigerians.”
He also added that if Nigerians really participated in cryptocurrencies, they cannot come to the CBN for consumer protection because CBN cannot control bitcoin. “Plenty of people just misinterpreted the fact that we desired to bring bitcoin to an end. We can never stop bitcoin. Bitcoin is not an invention of 2016. So, how can the Central Bank of Nigeria, not central bank of the world, stop the running and implementation of bitcoin?” he said.
Moreover, he emphasized the fact that all the CBN has been merely doing is sensitising Nigerians when either investing in digital currencies or dealing with them since the CBN has no abilities to control over any virtual money.
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