It is time to have a defined policy for cryptocurrency

Nigeria’s regime for managing digital assets such as cryptocurrencies has come under renewed pressure with divisions between the two regulators, namely the Central Bank of Nigeria (CBN) and the Securities and Exchanges Commission (SEC). The latter had recently issued new guidelines to regulate the operation of digital assets at stock exchanges in the country, although since January 12, 2017, the CBN had introduced a general ban on banks with respect to operations on cryptocurrency accounts. To highlight its zero tolerance of cryptocurrency transactions, the CBN had reiterated its 2017 ban in 2018 as well as 2021 and strictly ordered banks to comply with its 2017 embargo.

But about fourteen days ago, the SEC issued new guidelines for administering cryptocurrency exchanges, which are business suits that facilitate cryptocurrency transactions. Entitled “New Rules for the Issuance, Offering, Platform and Storage of Digital Assets”, they reinforce previous SEC guidance issued on September 14, 2020. In connection with the apparent discrepancy between policies in the CBN’s and SEC’s respective positions, cryptocurrency dealers and – Investors in Nigeria are now in a dilemma as to which authority to abide by. Meanwhile, these traders and investors all have common appeal options against banks that are blocked by the CBN from engaging in cryptocurrency transactions.

From a traditional point of view, the respective positions of the two institutions are justified because their arguments provide strong points to justify their claims. For example, by issuing its 2021 circular reiterating the ban, the CBN justified its position with its traditional concern for the protection of careless investors, who could easily be harmed by unscrupulous traders, as cryptocurrencies are not available in physical form as cash. , but are virtual, leaving only computer-savvy people to appreciate their status. The CBN clarifies that it only intends to protect the public interest with the ban, as the wide range of cryptocurrencies is neither legal tender nor traded on regulated platforms. This condition implies that careless customers risk losing their money to scammers. And to highlight the case of the apex bank, there are the daily stories of high-value fraud across the country involving millions and billions of naira and foreign currency. If these cases can occur with traditional financial transactions with regular processes, it is easy to imagine what would happen when the unregulated cryptocurrency regime becomes commonplace.

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On the other hand, the SEC appears to be driven by the growing use of the Nigerian public and elsewhere, and remains eager to begin a credible engagement with the cryptocurrency phenomenon in the country. Therefore, its guidelines aim to interact with stakeholders on the spot early by requiring all exchanges that issue cryptocurrencies to formally register with it. This initiative will provide it with the means to facilitate compliance with the rules governing cryptocurrency transactions. In addition, the SEC’s previous position appears to be boosted by the International Monetary Fund’s (IMF) call for all new payment systems to accept cryptocurrencies. Thus, the SEC says their new guidelines are designed to highlight the goal of predisposing the country to the inevitable introduction of cryptocurrencies. In this regard, its guidelines serve three policy objectives, which are to be aware of innovations in cryptocurrency transactions, to deepen the Nigerian cryptocurrency market and to provide solutions to problems. In essence, the positions of the SEC and the IMF are inspired by the growing popularity of cryptocurrencies, as they provide flexibility in transactions and payment systems.

It is therefore in the public interest that the CBN and the SEC harmonize their respective positions and follow a common path that will provide relief to Nigerians interested in cryptocurrency transactions. The imperatives of providing quality service to the public dictate that they harmonize their operational modalities in a way that will address CBN’s valid concerns about the safety of investors’ funds and the need to move towards achieving parity with the cryptocurrency front. regime. It is understandable that the two institutions are established to operate on separate operational grounds. While the CBN is primarily intended to manage money market affairs, the SEC must do the same for the capital market. The meeting point between them is that banks and some other financial institutions in the sector operate in both.

Nevertheless, such expectations are not without challenges that must be overcome in order for them to be realized. From CBN’s bearish stance, it is clear that there is a gap in the effective administrative capacity of the country’s money market institution. This weakness has prevented him from being ambitious and accepting additional responsibilities that the adoption of cryptocurrency will entail. It is time for the CBN to consider ways in which the country can benefit from any dividends that may arise from the new cryptocurrency regime without any loss to anyone. Both branches of government must work together to map the way forward.

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