Stakeholders Canvass Policies to Regulate Cryptocurrency
By Emma Okonji
The Nigerian Technology Industry Group has said there should be core policies that would help in regulating cryptocurrency providers in Nigeria. The group stated this following the directive given by the Central Bank of Nigeria (CBN) last month that deposit money banks (DMBs), non-bank financial institutions (NBFIs) and other financial institutions (OFIs), should not deal with cryptocurrencies and facilitating payments for cryptocurrency providers in Nigeria.
In a document released recently by the group, it analysed the implications of an outright ban on cryptocurrency trade in Nigeria, and suggested core policies that would help the CBN regulate all crypto transactions in the country.
According to the document, the directive would significantly dampen the quest for adoption of global best practices on financial inclusion, which include cryptocurrencies and virtual assets. Rather than outright ban, on cryptocurrencies, the industry stakeholders suggested different policy regulations such as ‘Know Your Customer’ (KYC), Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT).
The stakeholders advised CBN to, among other policy regulations, formalise KYC, AML and CFT processes for cryptocurrency providers; monitor transactions on cryptocurrency providers; ensure entities dealing with cryptocurrencies can be known and licensed accordingly; regulate cryptocurrencies as digital commodities and implement a Capital again Tax (CGT); implement a six-month suspension of the CBN’s latest cryptocurrency exchange restriction; create an off-shore international finance centre to ensure consistency with Nigeria’s diversification and exchange rate policy.
The stakeholders were of the view that outright ban would cost Nigeria so much, being a leader in the cryptocurrency space, where the world enthusiastically embraces the potential of cryptocurrency together with blockchain technology.
Analysing the risks associated with outright ban, the industry tech group said it would expose market participants to nefarious activities, thereby reducing the government’s ability to track in its entirety, while creating gaps for more fraudulent practices.
“Driving an underground market will expand the register of illegality around cryptocurrency trade and increase the demand for anonymity and concealment. The drive underground will truncate strategies targeted at reducing crime rates by creating more wicked developmental problems with complications for the economy. Additionally, the outright ban will cause untold hardships to traders whose transaction settlements are yet to yield value,” the group said.
It added that the directive may lead to unfair profiling and harassment from law enforcement authorities on anyone with any crypto trading applications on their mobile phones.
“The situation may exacerbate the current suffering from stereotypes attached to young Nigerian entrepreneurs in technology,” the group further said.
Highlighting the economic growth opportunities of trading in cryptocurrency, representatives of Nigerian Technology Industry Group, Kola Aina and Adia Sowho, said Nigeria had been at the forefront of technology innovation in African financial services for decades.
They said: “Progressive regulation by the Central Bank has created a billion-dollar Fintech industry, with hundreds of millions of dollars in investment, while creating thousands of jobs. Cryptocurrencies and their blockchain technology are the next financial technology with the potential to transform the payments and cross-border space, while accelerating financial inclusion. Government must therefore ensure that the adoption of cryptocurrencies are consistent with its diversification and exchange rate policies. To achieve this, we recommend that Nigeria emulates a model similar to China and establishes an International Finance Centre in a Special Economic Zone. The framework allows the Central Bank to license offshore banks that can operate in Nigeria’s free trade zones. Under this model, the government will attract significant foreign direct investment while sustaining the adoption of cryptocurrencies in a regulated environment.”
This way, Nigeria will continue to be a leader in financial innovation while protecting the general population from the adverse effects of unrestrained trade in financial products within the country’s customs area,” the group representatives further said.