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Re: Did the Central Bank of Nigeria Crypto-asset Ban Mislead the Public?

Newsletter #3

28th February, 2021.

Central bank misleads citizens by claim it did not place “new restrictions on cryptocurrencies”.  

Pursuant to the Nigeria central banking system authority crypto-ban policy pronouncement 5th February, 2021, all regulated Deposit Money Banks(DMBs), Non-Bank Financial Institutions(NBFIs), and Other Financial Institutions(OFIs) were “directed to identify persons and/or entities transacting in or operating crypto currency exchanges within their systems and ensure that such accounts are closed immediately”. 

Central Bank of Nigeria(CBN) building aerial view. Source: Global Finance.

In a subsequent statement dated 7th February, 2021 made in defence of its crypto-ban policy pronouncement, the CBN stated:

“As regards our recent policy pronouncement, it is important to clarify that the CBN circular of February 5, 2021 did not place any new restrictions on cryptocurrencies, given that all banks in the country had earlier been forbidden, through CBN’s circular dated January 12, 2017, not to use, hold, trade and/or transact in cryptocurrencies. Indeed, this position was reiterated in another CBN Press Release dated February 27, 2018.”.

The statement that CBN circular of February 5, 2021 did not place any new restrictions on cryptocurrencies is not true. The CBN circular of February 5, 2021 did place new restrictions on cryptocurrencies in Nigeria. And the apex bank defence response of 7th February, 2021 is filled with tergiversations, equivocations, internal material contradictions, and self-mirror image hypocrisies. Every factor the decentralised cryptocurrencies were accused of, the centralised fiat currencies created and managed by the central banks are also guilty of, as monetary and financial tools.. 

What “new restrictions on cryptocurrencies” Were Placed by the CBN? 

Per the Nigeria central bank’s “new restrictions on cryptocurrencies” imposed through the 5th of February, 2021 crypto-ban policy pronouncement circular:

  • Deposit Money Banks(DMBs), Non-Bank Financial Institutions(NBFIs), and Other Financial Institutions(OFIs) were directed to identify persons and/or entities transacting in or operating crypto-asset exchanges within their systems,
  • after such identification of persons and/or entities transacting in or operating crypto-asset exchanges within their systems, the CBN expected these legacy banking and financial service providers (DBMs, NBFIs and OFIs) to cut off such persons and/or entities transacting in or operating crypto-asset exchanges within their systems, by closing their account immediately.

These blatant “new restrictions on cryptocurrencies” were obviously not the status quo ante. Hitherto, persons and entities could transact and operate crypto-asset exchanges within the systems of these legacy banking and financial service providers (DBMs, NBFIs and OFIs), subject to effective Anti-Money Laundering(AML) and Counter-Financing of Terrorism(CFT) due diligence compliance obligation fulfilment as directed by the CBN. Ipso facto the central bank singular prohibitive act, Nigeria is officially signed up as a crypto-innovation hostile jurisdiction effectively shutting out the blockchain and distributed ledger technology money and finance Fourth Industrial Revolution(FIR).

Central Bank of Nigeria (CBN) Contradictory Crypto-Ban Statements 

In the January 12, 2017 circular, the CBN did require banks and other financial institutions “pending substantive regulation” to:

(i) Ensure that you do not use, hold, trade and/or transact in cryptocurrencies;

(ii) Ensure that existing customers, that are virtual currency exchangers, have effective AML/CFT controls that enable them to comply with customer identification, verification and transaction monitoring requirements;

(iii) Where banks or other financial institutions are not satisfied with the controls put in place by the virtual currency exchangers/customers, the relationship should be discontinued immediately;

(iv) And any suspicious transactions by these customers should immediately be reported to the Nigerian Financial Intelligence Unit(NFIU).

The CBN reiterates that VCs such as Bitcoin, Ripples, Monero, Litecoin, Dogecion, Onecoin etc, and similar products are not legal tenders in Nigeria, thus any bank or institution that transacts in such businesses does so at its own risks”. 

From the above, a string of facts quite relevant stands out in bold relief that the CBN did not ban, but rather did warn and caution banks and other financial institutions to not use, hold, trade and/or transact in crypto-assets. And in the alternative, when they use, hold, trade and/or transact in crypto-assets for existing customers, they should have effective Anti-Money Laundering(AML)/Counter-Financing of Terrorism(CFT) controls in place. Furthermore, when they become aware of suspicious transactions by their customers, CBN obligated them to immediately report such to the Nigerian Financial Intelligence Unit(NFIU). 

The January 12, 2017 circular furthered that crypto-assets are unregulated, and therefore not legal tenders in Nigeria, and thereupon, any bank or institution that transacts in such businesses does so at its own risks. A clear and concise content summary of the January 12, 2017 CBN circular does not show whatsoever that the CBN placed restrictions or a ban on crypto-assets.

CBN did caution, remind and warn banks and other financial institutions on crypto-assets, but did not ban crypto-asset transactions and crypto-asset exchange operations in Nigeria by virtue of its Press Release dated February 28, 2018 (not February 27, 2018) contrary to the claim in its February 7, 2021 crypto-ban policy defence response. Since the reiteration of an action that never was cannot stand, the common law notable pronouncement MacFoy v United Africa Company Limited (West Africa): PC 27 Nov 1961 per the immortal Lord Denning rings through. One cannot place something on nothing, and expect it to stand. It will simply collapse.

Boulevard A. Aladetoyinbo, Esq. 

Head, Crypto-asset Capital Formation Practice 

Lex Futurus Group.   

Disclaimer 

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

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