For many young people trading with Bitcoins, Ethereum, Ripple, Litecoin and other virtual currencies, the ban by the Federal Government on cryptocurrency came as a downing on a prized asset. Many economists and public analysts alike have reacted differently to this sudden development. Some have commended the ban. Others cite the economic implications of such embargo.
The question for this second category is: how do you place a ban on something that rakes in so much revenue for the economy and equally contributes to the national GDP? The point is captured in the words of former Vice-President, Atiku Abubakar who queried that “this is definitely the wrong time to introduce policies that will restrict the inflow of capital into Nigeria.”
However, part of what attracted CBN’s attention was the fact that Nigeria surged to become the second highest cryptocurrency destination in the world, after the US. Equally disturbing was the fact that it was raking in millions a week without any underlying economic activity to justify the massive flow of funds.
Anyone who is familiar with transactions in cryptocurrency knows that it is not traceable. Bitcoin is effectively anonymous. It is an untraceable method of payment and so facilitates illicit activities by enabling criminal elements make and receive payment without being tracked.
The FG and the Central Bank of Nigeria were alarmed by the United States’ Federal Bureau of Investigation that fraudsters were using cryptocurrencies to bring in millions of dollars into the economy.
The FBI uncovered that the activities of fraudulent Nigerians, otherwise known as Yahoo Boys, has made a good number of Americans jobless. This is because the millions of dollars they were sending to Nigeria through cryptocurrencies were monies released as stimulus package in the wake of the COVID-19 pandemic. The anonymity of the block chain made it difficult for the FBI and authorities to crack down on these criminal syndicates.
The FG, through the CBN, had to direct banks and other financial institutions to quickly shut down all accounts dealing in cryptocurrency after the information from the FBI.
Bello Hassan, the Director of Banking Supervision, and the Director of Payments System Management Department, Musa Jimoh, reinstated this in a signed circular directed to all banking and other financial institutions:
“Further to earlier regulatory directives on the subject, the Bank hereby wishes to remind regulated institutions that dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited.
“Accordingly, all DMBs, NBFIs and OFIs are directed to identify persons and/or entities transacting in or operating cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately.
“Please note that breaches of this directive will attract severe regulatory sanctions. This letter is with immediate effect.”
Asides the fact that the FG placed a ban on cryptocurrency following its popularity among fraudsters, more alarming was the fact that kidnappers had now switched to bitcoin for ransom payment knowing that it cannot be traced. This perhaps explains the surge in kidnappings across the country.
One of the challenges of the fight against Boko Haram insurgents is the fact that they have sponsors who fund them through cryptocurrency. Cryptocurrency is one of the various funding strategies deployed by Boko Haram. It has made it difficult in stemming the expansion of this terror group across the Northeast and Lake Chad region.
Over the years, there have been speculations that Boko Haram has sponsors within and outside the government. The conjectures appear convincing. The terrorists wield expensive sophisticated weapons and armory which can only be gotten through terrorist financing. That is, the various sources and avenues through which licit and illicit means are used by terror groups and their sponsors to raise resources for terror-related activities.
Soldiers of the Nigerian Army have consistently decried the use of sophisticated weapons by Boko Haram which include and not limited to Rocket Propelled Guns, Unexploded Ordnances, grenades, ammunition, etc.
Efforts to however crackdown on these sponsors have always hit the rocks. The FG has not been able to put name and faces to these sponsors. Some of the six Nigerians that were arraigned in UAE over allegations of sponsoring Boko Haram were reported to have been set up. The first and second were charged for joining Boko Haram knowingly.
The others were however charged with assisting the terror group. Reports had it that almost all the transactions that indicted the defendants were initiated by two undercover Boko Haram agents Alhaji Sa’idu and Alhaji Ashiru based in Nigeria from where they were facilitating the funding transactions.
Relatives of the defendants noted that there it was very likely that the defendants were deceived in the course of carrying out their legitimate bureau de change transactions not aware that such transactions formed part of proceeds connected to Boko Haram.
Terrorist groups like Boko Haram are usually funded through sources such as donations from charities, contributions from sympathizers, support by rogue states and money laundering activities. Other forms of black-market operations such as trafficking in persons, narcotics, engaging in kidnapping, and hostage-taking are also part of the funding system.
Experts and warfare analysts have also pointed out that any counter-terrorism strategy must incorporate measures aimed at combating how terrorist groups raise funds to finance their operations, given that their survival and operational capacity rely on these channels.
According to President of the European Central Bank, Christine Lagard, while speaking on the use of bitcoin, she noted that it is a highly speculative asset that has led to some reprehensible activity, including money laundering, and any loopholes need to be closed.
She further noted that “there has to be regulations. This has to be applied and agreed upon at a global level because if there is an escape that escape will be used.”
The ban on cryptocurrency seems to be a step in the right direction. First, to redeem Nigeria’s image. Secondly, to clampdown on criminal elements who deploy this means to perpetrate fraud nationally and globally. Third, to frustrate the funding of insurgency and make it easier to put a name and face to their sponsors. This is among other decisions that might have informed the ban.
Top personalities in the political space have nonetheless faulted the ban. Atiku Abubakar expressed concerns that the country was already suffering from the devastating impact of the COVID-19 era. He said this is definitely the wrong time to introduce policies that will restrict the inflow of capital into Nigeria:
“Especially after today’s report by the National Bureau of Statistics indicated that foreign capital inflow into Nigeria is at a four year low, having plummeted from $23.9 billion in 2019, to just $9.68 billion in 2020.”
The former CBN deputy governor, Kingsley Moghalu weighed in on the matter. According to Moghalu, he would not recommend banning cryptocurrencies outrightly in exchanges because over $500 million worth of Bitcoins have been traded in Nigeria within the last five years.
With a lot of ad-hoc policies from the CBN in recent years, trading in cryptocurrencies, according to Moghalu, protects users from fluctuations in the value of the Naira because every currency in the world depreciates in value over time because of inflation.
Having an unregulated and largely anonymous global currency sounds perfect, but when one thinks of all the harm that 10% of the world population can and will do with it, it greatly outweighs the benefits it brings. A regular banking system would leave a paper trail that’s easy to follow.
Blockchain can be traced, but it’s a very complex process that can be made even harder for those that can get around it. The government should rightfully be worried about the millions of dollars that they cannot regulate, trace or control.
There are however genuine crypto traders and those who have positive use for crypto. But the fear is, in a country like Nigeria, fraudsters and scammers have done the worst with it.
The activities of fraudsters have affected the perception of Nigerians. It has severed her relationship with the outside world. It is assumed that all Nigerians are fraudulent and foreigners are always overly cautious when dealing with Nigerians.This erroneous Nigerian narrative gained further ground upon the apprehension of popular Instagram celebrity, Hushpuppi.
Recall that Hushpuppi and his eleven cronies were unmasked in a special operation over cyber fraud involving 1.9 million victims to the tune of N168 million. The criminal suspects were arrested for crimes pertaining to banking fraud, hacking, identity theft, impersonation, and money laundering. In an affidavit filed by the FBI, it was noted that a large part of the sum from the various scams had been stashed away in a bitcoin wallet.
In reality, cryptocurrency has not been legislated out of existence. The government really cannot ban cryptocurrency because it is a digital currency. It has only told exchanges that they cannot continue to exchange and convert naira to a digital coin that it has no element of control over.