Nigeria’s crackdown on Bitcoin echoes global crypto dilemma

2021-03-25 22:37:37
Nigeria’s crackdown on Bitcoin echoes global crypto dilemma

When the Central Bank of Nigeria (CBN) issued a circular in early February warning banks and financial institutions that “facilitating payments for cryptocurrency exchanges is prohibited” and that they needed to identify and close accounts associated with them, it set the country’s crypto community alight.

This week, a representative for Nigeria’s central bank chief Godwin Emefiele reportedly sought to clarify the February 5 directive, telling reporters that it was not aimed at discouraging people from trading in cryptocurrencies like Bitcoin, but served to enforce orders in place since 2017 banning crypto transactions in the country’s banking sector.

But the 2017 directive did not prohibit crypto exchanges from using banking and payment channels. It simply required banks and financial institutions to ensure that their crypto-exchange customers have effective anti-money laundering and “anti-terrorism” financing controls in place.

The backlash and confusion echo a crypto-drama unfolding around the world as virtual currencies like Bitcoin grow in popularity and scale new heights during a time of unprecedented financial uncertainty stemming from the coronavirus pandemic, as well as uniquely domestic challenges.

In the United States this week, Federal Reserve Chairman Jerome Powell raised concerns about the role cryptocurrencies play in facilitating criminal activity, as well as their infamous volatility, calling Bitcoin “more of an asset for speculation” than a substitute for the US dollar.

In Iran, authorities have ordered a temporary suspension of activities in a major cryptocurrency mining factory located southeast of the country amid a significant increase in demand for electricity in the country that has resulted in blackouts and pollution in the capital Tehran and other major cities.

The developments illustrate the regulatory conundrum governments face with crypto assets that by design are intended to be decentralised and beyond their reach, but which are part of a rapidly evolving sector of global finance that pivots on innovation.

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