CBN Crypto Payment Rail and Fiat Payment Rail Disconnection: Will the Regulator Ever Get “Crypto”?

Lex Futurus Newsletter #2, 

12th February, 2021. 

CBN Crypto Payment Rail and Fiat Payment Rail Disconnection: Will the Regulator Ever Get “Crypto”?

The Colossus Apollo at Rhodes 

5th February, 2021 the Nigeria central banking system galaxy guardian stood towering high above like the Colossus of Rhodes; a statue of Apollo. This time the banking Colossus bestrides the country’s monetary harbour entrance. Uncertain! In doubt! Hummed and hawed for awhile, and after down goes smashing the banhammer in hand deposited. Hold the fort! The result is a disconnection of fiat from crypto and crypto from fiat. No more on-ramp off-ramp payment rail connection or linking between age-old centralised Financial Market Infrastructure(cFMI) and emerging decentralised Financial Market Infrastructure(dFMI). Headlines; Nigeria central bank bans crypto, as Kenya central bank leapfrogged with the Bitcoin Standard. The difference is clear as day. And so it begins! 

Crypto Ban Wake Shrill Public Outcry

It is a retrogressive policy! It stifles distributed ledger blockchain financial technology innovation (blofintech). Public outcry home and abroad rent the air. In obvious response, country’s senate National Assembly upper chamber summoned central banking authority head honcho to come offer an explanation whys and wherefores. Banhammer and sledgehammer commingled, come down hard this heavy and result, severed crypto and fiat money payment transfer ties. Since earlier it doubted its own action before the hammer, the central fiat debt money banking authority offered a half-hearted defence response in the shrill public outcry wake, where it asserted albeit weakly, its fiat money monopoly gravitas and podesta exclusive of all others public and private. Yet, a fleet glance at the Austrian monetary economist Friedrich Hayek’s magnum opus “Denationalisation of Money: The Argument Refined”, is a big reveal ab initio that currencies can compete for the good of all, and the central banking institutions alone should not have to control money creation, circulation, reserve, supply, policy and other relevant activities. Sage to make new separate policies, frameworks, guidelines, and regulations to embrace the DLT blockchain financial technology innovation. But things are best left unsaid since it seems the Nigeria central banker does not get money in crypto-form yet. 

Crypto-asset FinTech Revolution 

Meanwhile, DLT blockchain financial technology (blofintech) is where the payment system revolution is happening, not the legacy non-DLT blofintech traditional fintech, which is the CBN exclusive focus. Does the Nigeria central bank authority get this though? Has any of the Nigeria central bank fintech policy and regulatory efforts addressed blockchain financial technology in mind, beyond urging systems that accept and settle payments in crypto to implement strict KYC/AML measure due diligence compliance with “customer identification, verification and transaction monitoring requirements;” before and after onboarding process completion?

The first mover decentralised crypto-asset blockchain use case bitcoin has enabled no-KYC/AML peer-to-peer seamless cross-border transactions with cryptographic proof instead of central banking ledger trust platitudes thirteen years on. Bitcoin blockchain open source decentralised network up 99.98% has suffered no successful cyber-attack or a server downtime event, except during upgrades and forks in its journey through a money and finance world which it has infused the proverbial Golden Fleece equity arrogated by the central banking system who prints endless debt money christened bank credit money when the system deems fit. One of the other central bank system anomalies is inflating away existing fiat currency value. Satoshi Nakamoto addresses the fiat debt currency central bank public trust breachers:

“The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve”

Debt Money United Nations 

Unlike fiat bank debt money, bitcoin like gold; a digital gold, is the miner’s equity; one mines it, and owns it. No debt created. Each time the central banker creates “money”, debt is created;  loan debt is created through bank loan extension, and bank deposits are the central bank balance sheet liabilities. All the sovereign nation-states are in debt. Ironically, the richest among them is saddled with the most goliath height hunchback debt. 

cFMI to dFMI

Crypto-asset exchange platforms enable mainstream crypto-asset adoption, by connecting the crypto world to the fiat world. But of late, in an assay to protect her grossly inefficient centralised Financial Market Infrastructure (cFMI) digital asset against the decentralised alternative distributed Financial Market Infrastructure (dFMI) digital asset, the Nigeria central banking authority  joined the ranks of prohibitive, crypto-innovation hostile central bank colleagues who have gone down this ignoble road to disconnect crypto-payment rails from the fiat payment rails. The disconnection of the rails does not mean “ban”. The banhammer does not work on decentralised node crypto-assets, as they are the exact antithesis of central banking, operating in a P2P transaction context. The alphanumeric cryptographic sequence mathematics essence of “crypto” cannot be “banned”. Why would CBN call the cryptoasset dog bad names to hang it.

Most or all the CBN argument data-points justifying crypto payment rail disconnection from the legacy banking system are stale, drab and dour, lacklustre, rancid and rank hypocrisy. It is high time the Central Bank of Nigeria(CBN) gets its acts together and introduce a custom crypto-asset fintech regulatory regime.

Institutional crypto, deep space cypherpunk libertarian get-out-of-the-endless-money-printing system” crypto, darknet market crypto, any-context crypto, the crypto- that the incumbent central banking authorities should get how it works and regulate is the cryptographic infrastructure underpinning the 21st-century glocal monetary payment system. Though in its distributed ledger computing technology manifestation it appears decentralised as the rules make like they are “rules without rulers”; autonomous,  written in the code, and thus consensus-based. 

The CBN has created the “extreme case” scenario banning all financial institutions and intermediaries transacting in crypto-assets, rather than maintaining the hitherto permissive status quo “effective AML/CFT controls” compliance conditio sine qua non for crypto-asset exchange user onboarding processes. But yet, instead of the extreme case scenario it took, the CBN could have increased information reporting obligations, and overall initiate crypto-asset exchange operation review and assessment pending applicable, requisite policy introduction, rules and regulations publication for crypto-asset exchanges and other entities involved.


This newsletter has no financial or legal advice piece intention. It serves informational and educational purposes only.

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