Just yesterday, a lady made a joke about the recent hot chase for new naira notes. She said, “bankers and gas station attendants are the gods of the land for now.” (LOL) And I’m sure you can relate, especially if you are living in Nigeria at the moment.

We have been told that a major reason for the creation of new naira notes is to expose thieves who have piled up the nation’s currency notes in their houses. While we can’t say if that goal has been met, it does remind us of when CBN banned crypto transactions for a similar reason.

Obviously, it would take more than a ban to stop crypto transactions in a nation that has accounted for crypto transactions worth 566 million dollars in the last five years.

So, in this article, we’ll look at the real reason why CBN has been against crypto since 2017 and tried to stop it in 2021.

Why CBN Banned Crypto (What they said)

According to CBN, 

• Bitcoin and other cryptocurrencies are used for money laundering and terrorism;
• Crypto transactions are devoid of proper regulation and expose users to financial risks;
• The anonymous nature of cryptocurrency makes it prone to financial crimes;
• Cryptocurrencies are used in the purchase of hard and illegal drugs on the darknet website called “Silk Road”
• Terror plots are being financed with cryptocurrencies;
• Some cryptocurrencies have become more widely used as speculative assets rather than as means of payment; leading to significant volatility and variability in their prices.

Source: https://bit.ly/40ew3Q7

Not to argue whether any of the above reasons is a lie but let’s see the real reason why CBN hates crypto.

Why CBN Banned Crypto (The truth)

No regulation

Crypto is decentralized with an underlying technology that does not allow any government to regulate it. CBN cannot determine the direction of crypto and they are not happy about that.

Lack of influence

Closely related to that, CBN does not want to lose control over currencies but that’s exactly what crypto is offering. And as such, CBN will not be able to track down any illegal activities that individuals may carry out with crypto. 

Complex technology

Bitcoin and other cryptocurrencies make use of blockchain technology, which is complex. Therefore, CBN (or the government) have a hard time figuring out how they will collect taxes or make money policies if crypto was adopted.

Bitcoin Adoption

The increased adoption and interest in bitcoin and other cryptocurrencies is another reason why CBN is angry. The more the public uses Bitcoin as a store of value and medium of exchange, the more the banks and governments lose control over the financial systems. 

No more revenue from foreign remittance

Finally, CBN/government is against crypto because it deprives them of the revenue gotten from foreign remittances.

To make things clear, foreign remittance is a transfer of money from a foreign worker to their family or other individuals in their home countries.

In the past few years, it has been a large source of foreign income for Nigeria. But with bitcoin, funds can be moved across borders without going through the hassle of processing a remittance. Oops! 

Conclusion

CBN is wary of crypto because it has the potential to overturn the existing financial system and undermine its role in it. As it stands,  cryptocurrencies represent three challenges to government authority: they cannot be regulated, they are used by criminals, and they can help citizens circumvent capital controls.

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