It’s time for a defined cryptocurrency policy

Nigeria’s regime for managing digital assets such as cryptocurrencies has come under renewed pressure with divisive airs from 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 by exchanges in the country, just as the CBN had imposed a blanket ban on banks from transactions on cryptocurrency accounts since January 12, 2017. To accentuate zero tolerance for cryptocurrency transactions, the CBN had reiterated its 2017 ban in both 2018 and 2021, and strictly instructed banks to abide by its 2017 embargo.

However, about two weeks ago, the SEC issued new guidelines for the management of cryptocurrency exchanges that are business attire that facilitate cryptocurrency transactions. Titled “New Rules for the Issuance, Offering, Platform and Custody of Digital Assets,” they reinforce previous SEC guidelines issued on September 14, 2020. In the context of the apparent mismatch of policy in the respective positions of the CBN and SEC, cryptocurrency dealers and investors in Nigeria are now in a quandary over which authority to comply with. Meanwhile, these dealers and investors all have a common recourse against banks being blocked by the CBN from entering into cryptocurrency transactions.

Moreover, from a traditional point of view, the respective positions of the two institutions have merit, as their arguments provide strengths to justify their claims. For example, by issuing its 2021 circular reiterating the ban, the CBN justified its stance with its traditional concern for protecting unwary investors who could be easily harmed by unscrupulous dealers, as cryptocurrencies are not available in physical form such as cash. money, but are virtual, allowing 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 means that careless customers risk losing their money to fraudsters. And to highlight the case of the top bank, there are the daily stories of high-profile fraud cases across the country, involving millions and billions of naira and foreign currency. If these cases can arise in traditional financial transactions with regular processes, it is easy to imagine what would happen if the unregulated cryptocurrency regime became commonplace.

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On the other hand, the SEC seems to be guided by its growing use by the Nigerian public and elsewhere, and remains eager to make a credible commitment to the cryptocurrency phenomenon in the country. Therefore, the guidelines aim to establish early contact with stakeholders on the ground by requiring all exchanges issuing cryptocurrencies to formally register with the company. This initiative gives it the means to facilitate regulatory compliance related to cryptocurrency transactions. In addition, the SEC’s previous stance appears to be boosted with the International Monetary Fund’s (IMF) call that all new payment systems must accept cryptocurrencies. As a result, the SEC says its new guidelines are designed to accentuate the goal of predisposing the country to the inevitable adoption of cryptocurrencies. In this regard, its guidelines serve three policy objectives, which is to be aware of innovations in cryptocurrency transactions, deepen the Nigerian cryptocurrency market, and provide solutions to problems. Essentially, the SEC and IMF positions are inspired by the growing popularity of cryptocurrencies, as they provide flexibility in transactions and payment systems.

It is therefore in the interest of the general public 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 requirements of providing quality service to the public dictate that they harmonize their operational modalities in a way that addresses the CBN’s well-founded concerns regarding the safety of investors’ funds and the need to achieve parity with the forefront of cryptocurrency. diet. Understandably, the two institutions were created to operate on different 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 are active in both.

Nevertheless, such expectations are not without challenges that must be overcome in order to achieve them. The CBN’s bearish stance reveals a gap in the effective administration capacity of the country’s money market institution. This weakness kept him from being ambitious and taking on additional responsibilities such as the adoption of cryptocurrency entails. It’s time for the CBN to think about ways the country can profit from any dividends that may come from the new cryptocurrency regime at no loss to anyone. Both branches of government must work together to chart the way forward.

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