The Central Bank of Nigeria (CBN) last week ordered banks to close the accounts of any entity using cryptocurrencies. Now, the institution justifies its actions with a list of reasons.
According to a February 8th report by Nigerian news outlet The Nation, the local central bank’s acting director of corporate communications, Osita Nwanisobi, suggested that the privacy features of digital assets have no benefit for legal transactions:
The question that one may need to ask therefore is, why any entity would disguise its transactions if they were legal. It is on the basis of this opacity that cryptocurrencies have become well-suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion.
Nwanisobi has gone as far as raising concerns over the nature of the very word "cryptocurrency," suggesting that it “suggests that its patrons and users value anonymity, obscurity, and concealment.” He also cited the use of digital currencies on the deep web for acquiring illegal goods. As an example he named deep web marketplace Silk Road, which was shut down seven years ago. Nwanisobi further showed himself alarmed by the use of cryptocurrencies as speculative assets:
“Repeated and recent evidence now suggests that some cryptocurrencies have become more widely used as speculative assets rather than as means of payment.”
While the CBN appears worried about the "anonymity" and "obscurity" connected with cryptocurrencies, pseudonymous digital assets like Bitcoin leave behind plenty more traces than cash for law enforcement to follow if they are used for illegal purposes. Still, its supposed role as a tool for criminals is not the only reason why Nwanisobi is wary of Bitcoin.
According to Nwanisobi, Bitcoin’s limited supply “has created a perverse incentive that encourages users to stockpile them in the hope that their prices rise.” This, he stated, attracted “a conglomeration of desperate, disparate, and unregulated actors” which in turn resulted in unprecedented price volatility, keeping institutional investors from investing in Bitcoin.
Recent events contradict Nwanisobi's point. On the same day that the CBN's statement was published, Tesla revealed it had purchased $1.5 billion worth of bitcoin, making the firm the latest of a growing list of institutional investors in the asset. Just days prior, Tesla CEO and world's richest person Elon Musk suggested that "Bitcoin is on the verge of broad acceptance by conventional finance."
While the CBN believes cryptocurrencies "do not have fundamentals and would never have fundamentals," it is confident in its operations and reforms which it said had driven innovation within Nigeria's payment system over the last decade.