Nigeria’s Vice President Yemi Osinbajo has voiced his concern over Nigeria’s central bank’s approach to the evolution of cryptocurrency in Nigeria. Speaking at the Bankers Committee Vanguard on Friday, Prof. Osinbajo said Nigeria “needs to act with knowledge not fear” in addressing the concerns emanating from blockchain technology.
On Feb. 5, the Central Bank of Nigeria (CBN) announced that cryptocurrency trading in Nigeria has been banned, throwing the country’s booming crypto market into disarray.
The CBN justified the decision citing the use of blockchain ledger to perpetrate money laundering, fund terrorism, and execute other illicit transactions. The Apex bank also pointed to the danger cryptocurrency is posing to Nigeria’s mainstream financial system.
However, CBN’s decision to ban cryptocurrency trading has been greeted with heavy criticisms. Experts have described it as an unprogressive and irrational decision, capable of spooking investors.
Fiyin Osinbajo, the son of the Vice President, said CBN’s decision to ban cryptocurrency will hurt Nigeria’s chances to attract investors and consequently, the country’s rank in the technology world.
Cryptocurrency has $1 trillion market capitalization that every country wants to cut a share from. Other countries who share the same sentiment with Nigeria on cryptocurrency are working to address the fears by developing frameworks to regulate it.
As of December 2020, Nigeria had the second highest volume of cryptocurrency transaction after the United States. The decision of the CBN will not only hurt the booming market, it will also put food off the table of many Nigerians who have found jobs in blockchain technology.
Prof. Osinbajo said cryptocurrency will inevitably disrupt the traditional banking system because it provides a cheaper alternative for cross-border transactions. He thus recommended regulation instead of prohibition, noting that blockchain technology has come to stay, and Nigeria will be left behind if she doesn’t follow up.
Read the full statement:
“On the very topical issue of blockchain technology, digital assets, and cryptocurrencies let me say two things.
“First is that there is no question that blockchain technology generally and cryptocurrencies, in particular, will in the coming years challenge traditional banking, including reserve banking, in ways that we cannot yet imagine so we need to be prepared for that seismic shift and it may come sooner than later. Already, remittance systems are being challenged. Blockchain technology will provide far cheaper options for the kind of fees being paid today for cross-border transfers.
“I am sure you are all aware of the challenge that the traditional SWIFT system is facing from new systems like Ripple, which is based on the blockchain distributed ledger technology with its own crypto tokens. There are, of course, a whole range of digital assets spawned daily from blockchain technology.
“Decentralized finance, using smart contracts to create financial instruments, in place of central financial intermediaries such as banks or brokerages is set to challenge traditional finance. The likes of Nexo finance offer instant loans using cryptocurrency as collateral.
“Some reserve banks are investigating issuing their own digital currencies. Clearly the future of money and finance, especially for traditional banking, must be as exciting as it is frightening. But as we have seen in many other sectors, disruption makes room for efficiency and progress.
“I fully appreciate the strong position of the CBN, SEC, and some of the anti-corruption agencies on the possible abuses of cryptocurrencies and their other well-articulated concerns, but I believe that their position should be the subject of further reflection.
“There is a role for regulation here. And it is in the place of both our monetary authorities and SEC to provide a robust regulatory regime that addresses these serious concerns without killing the goose that might lay the golden eggs. So it should be thoughtful and knowledge-based regulation not prohibition. The point I am making is that some of the exciting developments we see call for prudence and care in adopting them, but we must act with knowledge and not fear,” he said.