Central Bank of Nigeria (CBN) recently instructed commercial banks that “dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited” and ordering them to close any accounts transacting with cryptocurrencies.
Banning of crypto traders from using the banks doesn’t solve the underlining problem of opportunistic criminal activities. Without meaningful regulation the policing institutions have no real power to deal with illegal activities in the crypto space. Shady elements will continue unabetted in this regulatory desert.
United Africa Blockchain Association (UABA) understands that KYC is integral to Nigeria’s fraud prevention framework in the financial industry. CBN’s assertion that crypto traders are against KYC is unjustifiable. Crypto exchanges have in fact complied with existing KYC standards.
Nigeria-based exchanges like BuyCoins, Bundle, Quidax and the likes of Luno and Binance based outside the country do KYC for onboarding new customers. They require their customers provide a name, bank verification number, government-issued IDs, phone number, and a selfie, and have maximum trading amounts.
Furthermore, chain analysis has dealt with the issue of anonymity of transactions. It is a proven effective investigative method to track and trace transactions. US Federal Bureau of Investigation (FBI) used it successfully to arrest Silk Road founder Ross Ulbricht.
The demonising of this cryptocurrencies doesn’t justify the lack of political will. The real problem is that of crime. The juxtaposition of cryptocurrency use of privacy and anonymity as the criminal is unfortunate. Financial institutions all relay on privacy more so the banks; which have not been impervious to the same malaise that plague cryptocurrency. However, the banks have benefited from robust regulation and the instruments offered to mitigate such breaches.
UABA urges the CBN to reconsider this position. It is possible to regulate the sub-sector as well prevent any abuse that may be harmful to national security. The banks with crypto-exchanges as customers have monitored them for AML/CFT controls.
UABA recommends the regulatory approach of identifying digital assets according to their function. Where they are existing laws regulating similar products and services, they should be extended to apply to crypto assets.
To do nothing other than a smear campaign won’t make the problem go away. Neither will it protect the financial systems that are in need of updating so that they might meet and support the current economic systems and growth trajectory. A Legal framework must serve the needs of the society. The current needs of the young African entrepreneur need a committed referee and a growth partner.