BY BUKOLA IDOWU and OLUSHOLA BELLO,
About 60 per cent of central banks across the world are under serious pressure to create and issue sovereign digital currency, LEADERSHIP findings have revealed.
Already, five countries namely China, Ecuador, Senegal, Tunisia and Singapore have issued digital currencies, while some countries are currently discussing the modalities of their respective central bank digital currencies.
The move, according to findings, is not unconnected with the increasing global acceptability of cryptocurrencies within a short time it has existed.
Despite regulatory restrictions on the trading of cryptocurrency, its increased fame has been a source of worry to central bank governors worldwide, including Nigeria.
Some of the apex banks’ governors, it was also learnt, are now muting the idea of a digitalised global currency.
Although cryptocurrencies are unregulated, the new digital currency being proposed by these central banks would be highly regulated, which will, invariably, spell doom to the existence of cryptocurrencies worldwide.
Confirming the development during a virtual meeting of the Finance Correspondents Association of Nigeria (FICAN) monthly forum in Lagos yesterday, an economist and chief executive officer of Global Analystics, Tope Fasua, said the need for sovereign digital currency is becoming germane now that cryptocurrencies are now gaining traction.
He said though no banker to the government will support cryptocurrency, they have no option than to begin to issue their own Central Bank Digital Currency (CBDCs).
“About five countries namely; China, Ecuador, Senegal, Tunisia and Singapore have issued digital currencies, and not cryptocurency, and bankers know that they are in trouble if cryptocurrencies really take off and replaces traditional currencies,” he noted.
Specifically, he said quite a number of bankers have invested in cryptos just to hedge their bet, adding that the traditional financial system is deeply rooted, organised and backed by government, unlike the cryptocurrency mining space.
Speaking on the topic, ‘Ban on Cryptocurrency-related accounts in Nigeria and concerns of global central banking,’ Fasua stated that the proponents of the cryptocurrency believe there is a need to push back and do something different, that will mimic the attributes of a gold-backed currency in view of durability and scarcity, but better than the current system by being smart, secure and not possible for central banks to issue at will.
He stated: “If it started as a rebellion (which is the case), then you must think of the incentive for the global economy to sign on to that rebellion with you against the devil they know. This then means that until there is global acceptance of the currencies, it will continue to be easy to create panic in the crypto world and big players can dump the currency when they have achieved gains.
“It then becomes worse than the stock markets because for cryptocurrencies, the fundamentals are non-existent apart from an analysis of how many are adopting the currency and who is winning between an established traditional banking system and the new kids on the bloc”.
He further explained that Cryptocurrency is heading to global single currency but one major challenge is that there is a lot of loses in it and that when most coiners die, no one is able to access their investments which ab initio are encrypted with passwords, passphrases and whatnot.
“People don’t usually plan to die. Now, this is where regulation helps in the financial markets. Apart from deposit insurance, which kicks in, in the event of the collapse of an insured and regulated financial institution, the relations of a dead account holder in a traditional bank could still have access to their balances,” Fasua stated.
Meanwhile, on the floor of the senate on Tuesday, the governor of Central Bank of Nigeria (CBN), Mr Godwin Emefiele, had said Nigeria had become a focal destination for virtual currency exchange, coming second in the world after the United States.
Emefiele said Nigeria was currently vulnerable, which necessitated the decision to check and monitor the activities of faceless players in cyberspace who could use the dark platform to promote violence crimes in Nigeria.
He further disclosed that the CBN has issued directives to investigate and track illegal transactions through the crypto-exchange to unmask actors behind dark transactions, noting that the apex bank has taken it as a great concern since Nigerians stumbled into cryptocurrency.
He said because players in the dark financial system cannot be trailed, that is why most governments in the world have not approved it.
Emefiele stated: “Since when Nigeria stumbled into its usage, we have been studying its development. We know enough at this stage to decide that the continuation of this crooked activity significantly threatens the safety and soundness of our financial system.
“CBN has a major and primary responsibility as a primary regulator to protect activities of all actors and stakeholders and particularly uninformed actors in that space. That is why we have asked all banks to desist from operating cryptocurrency accounts in Nigeria.
“For the avoidance of doubt, we have asked our banking supervisors, our payment system and our ICT department to conduct a thorough investigation into the activities of current exchanges and their major players.”
