Nigeria: Why Banning Cryptocurrency Transactions Is Not Right - Moghalu

(file photo)
8 February 2021

"This is livelihoods for Nigerians, so why would you take actions that look as if you are taking away opportunities from Nigerians especially in a depressed economy."

A former deputy governor of the Central Bank of Nigeria (CBN), Kingsley Moghalu, has urged the apex bank to look at ways of managing the risks of cryptocurrencies rather than impose an outright ban.

He said this on Sunday, during Channels TV's Politics Today show, while reacting to the CBN directive that all Nigerian banks should close all cryptocurrency-related accounts.

Mr Moghalu, who served as a deputy governor of CBN between 2009 and 2014, and was the presidential candidate of the Young Progressive Party during the 2019 election, said he would not have taken such a decision if he had the opportunity.

As a former deputy governor in charge of financial system stability, Mr Moghalu said he would have been aware or conscious of the risks of cryptocurrencies.

The regulator had on Friday ordered Nigerian banks to close all cryptocurrency-related accounts. It has also barred financial institutions from facilitating cryptocurrency payments in the country.

In the letter, the CBN referenced a circular it issued on January 12, 2017, which cautioned Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs), and other financial institutions (OFIs) as well as members of the public on the risks associated with such transactions.

Also, in a statement issued on Sunday, the apex bank explained why it banned cryptocurrency-related transactions in the country, claiming the digital currency is used for money laundering and terrorism.

The decision has sparked outrage from mostly young people in a country that is the world's second-biggest user of virtual currencies like Bitcoins.

The former vice president, Atiku Abubakar, in a statement issued on Saturday had called on the CBN to reverse its policy directing Nigerian banks to close all cryptocurrency‐related accounts and stop such transactions in the country.

He said the first challenge facing Nigeria is youth unemployment and that it is an emergency that needs urgent attention.

Mr Moghalu in his response said there is a reality in the world today that a lot of the world is going digital, and that cryptocurrencies are part of it.

"So my attitude would be how can we best manage the risks of cryptocurrencies to ensure that they do not affect the stability of the financial systems. That's what I would have done," he said.

The former CBN official said, "I would not recommend banning it (cryptocurrencies) outright in exchanges because also, $500 million worth of Bitcoins have been traded in Nigeria within the last five years."

He said, "This is livelihoods for Nigerians, so why would you take actions that look as if you are taking away opportunities from Nigerians especially in a depressed economy."

Mr Moghalu explained that one of the things that attract Nigerians a lot to cryptocurrencies is because a lot of the policies that have come out from the CBN in recent years are a bit ad-hoc as a result of the day-to-day changes and policies that concern remittances and forex exchanges.

"But trading in cryptocurrencies protects them from fluctuations in the value of the Naira because every currency in the world depreciates in value over time because of inflation and this is one of the reasons why a lot of people go for cryptocurrencies," he explained.

They are risky, he said, but they don't have the problem of depreciation because of inflation.

"In fact, in 2018 the value of a Bitcoin was about $3000, today about two and half years it's $38,000 for one BTC. So this gives you a sense of whats going on. Now does that mean it is sustainable? No!" he said.

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