Cryptocurrencies: The real issues

In a country where avenues for legitimate business is akin to ramming the proverbial horse through the eye of the needle, I can understand the anger if not the frustration of those who saw the so-called ban on cryptocurrency as another instance of the regulatory overkill for which our dear country has long acquired continental, if not global, notoriety. That some have actually equated the CBN hammer to withdrawing the operating licence of an entity and at such an inauspicious moment that reeks of bad faith is therefore no surprise! Indeed, as far as many among our fledgling tribe of techies are concerned, Nigeria has only again lived to its reputation as killer of dreams, a graveyard for talents and dreams to boot – with the CBN merely acting as a not-too-sympathetic undertaker!

Cryptocurrencies: The real issuesSo much for the purported ban; whereas only a few can claim to know how the “digital or virtual currencies issued by largely anonymous entities actually work, suffice to say that its growing popularity – never mind its opacity –has since made the endeavour a little more than one of idle curiosity.

At a church forum some two years back, we had a speaker talk to us on the business. Trust me, my primary instinct was to raise the issue of regulation. Trust the old-fashioned investor in me, I needed more than the cold assurances offered by some shadowy, invisible players – far beyond the alluring promises of hefty returns on investment –to take a plunge! Yes, you guessed right – I never did precisely because there was no such thing as regulation!

Yet for those who remains persuaded, the crypto business is supposed to be the stuff of which the next big dreams are made, ranking perhaps topmost in the league of the drivers of the next fintech revolution. Merely by the portfolio size – some $500 million by the last account, it has become something of a force too difficult to ignore. And while not necessarily exclusive to the Z-Generation, it is increasingly touted as an investors’ delight both for the returns on investment and as a veritable store of value. Which explains why not a few actually see it as the next big thing after oil!

To describe the CBN directive as a “ban” would certainly be an overstatement of the matter. For contrary to what is being peddled around about the measure, the apex bank merely directed those under its regulatory orbit to close the accounts of cryptocurrency exchanges. In other words, whereas the latter are free to carry on their activities, these can only be done outside of the CBN’s remit – the mainstream financial system. Rather than the talk of killing the business therefore, those familiar with how the business works have since pointed at nearly a dozen outlets through which the business could be carried out.

Which takes us to the ratio presented by the CBN to justify the drastic measure. The first is that “their use in Nigeria goes against the key mandates of the CBN, as enshrined in the CBN Act (2007), as the issuer of legal tender in Nigeria. Simply put, the use of cryptocurrencies is a direct contravention of existing law. On this, there is pretty little to add. Second, that the very name and nature of “cryptocurrencies” suggests that its patrons and users value anonymity, obscurity, and concealment. Which of course begs the question: why would any entity seek to disguise their transactions if they are legal? “Cryptocurrencies”, the CBN would equally aver, “have become well-suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion”. Again, no one has yet denied the charge as lacking some grains of truth. And finally, that some cryptocurrencies have become more widely used as speculative assets rather than as means of payment, thus explaining the significant volatility and variability in their prices – something against the grain of monetary system stability which the CBN sees as the core of its many but variegated functions.

If one had thought the well-reasoned positions have moderated the rage directed at the apex bank, the contrary turned out to be the case – a fact that would underlie why public policy is such an impossible undertaking in these parts.

That was before Vice President Yemi Osinbajo weighed in. With his powerful interjection, it is hard to know how far things have since changed. Far beyond providing validation to what some among the army of critics of the CBN measure have put out, he actually sought to press the apex bank on the need for a rethink. His premise is as simple as it is persuasive: “Rather than adopt a policy that prohibits cryptocurrency operations in the Nigerian banking sector, we must act with knowledge and not fear and develop a robust regulatory regime that is thoughtful and knowledge-based”.

He said more: “There is no question that blockchain technology generally and cryptocurrencies, in particular, will in the coming years challenge traditional banking, including reserve (central) banking, in ways that we cannot yet imagine.”

And then: “We need to be prepared for that seismic shift. And it may come sooner than later”.

And finally: “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.”

Good observations, no doubt. I understand where the VP is coming from. As a lawyer, everything comes basically to the sacrament of the printed word –using the instrumentality of the text to envision the future – the province of learned men!

In this, the erudite professor appears to have overlooked two crucial matters: the first is that the apex bank, under the current strictures have neither the depth of understanding of the cryptocurrency environment nor the sophistication in terms of the instrument required to regulate the business, which by its nature, is not only supranational but one whose network is as complex as it is incomprehensible! At this time, the quest is not so much about our aspirations to the global orbit; rather, it is whether a country that cannot properly identify its citizens could afford to launch into a world where a mild trigger can send the entire framework of global finance crashing on everyone’s heads.

If I understood the CBN and SEC’s positions, it is that the financial sector is far from ready to assume such risks at this time!

The other worry is the challenge that cryptocurrencies present to the ethos of work! Nigerians are understandably adventurous lots. It explains their ubiquity – in medicine, finance, ICT, name it. But then, we have also seen another growing counter-culture – the appetite for risks of a most heinous kind –from gambling to the endless craving for wealth without work – an inversion – if you like –of the protestant ethic by a ruthless band for whom money and more money is the driving force!

Think it doesn’t matter? You only need to remember how, for the delinquency of a few bankers, the treasury in 2008 was nearly emptied to save the financial services sector from ruin.

Nation

Which takes us to the ratio presented by the CBN to justify the drastic measure. The first is that “their use in Nigeria goes against the key mandates of the CBN, as enshrined in the CBN Act (2007), as the issuer of legal tender in Nigeria. Simply put, the use of cryptocurrencies is a direct contravention of existing law. On this, there is pretty little to add. Second, that the very name and nature of “cryptocurrencies” suggests that its patrons and users value anonymity, obscurity, and concealment. Which of course begs the question: why would any entity seek to disguise their transactions if they are legal? “Cryptocurrencies”, the CBN would equally aver, “have become well-suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion”. Again, no one has yet denied the charge as lacking some grains of truth. And finally, that some cryptocurrencies have become more widely used as speculative assets rather than as means of payment, thus explaining the significant volatility and variability in their prices – something against the grain of monetary system stability which the CBN sees as the core of its many but variegated functions.

Source: https://newsherald.com.ng/2021/03/09/cryptocurrencies-the-real-issues/

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