A former Deputy Governor of the Central Bank of Nigeria (CBN), Prof Kingsley Moghalu, yesterday faulted the Central Bank of Nigeria (CBN) over its blanket ban on trading on cryptocurrency.
According to him, instead of the kneejerk “reactionary’ step of the apex bank, it ought to have engaged in deep thinking and be more innovative to be at the front of the curve.
Moghalu, who was in charge of Financial System Stability, at the CBN, told Arise Tv in an interview, that during his time at the apex bank, there were a lot of innovations about how to ensure the stability of the financial system.
He said: “Cryptocurrencies are one more facet of a process that continues throughout history which is innovation. Let me remind you that paper money or what we call fiat money which is legal tender as ordered by governments has not always been in existence through creation. The first paper money or fiat money came about in the 11th century. It was issued in China by the Yuan dynasty and that is why the Chinese currency is called the Yuan. Starting from the 17th or 18th century, paper money became more prevalent across the world and has had its up and down but still remains the currency in the world today.’’
He explained that cryptocurrencies are virtual currencies that people use online to purchase goods and services, adding that one cannot obtain a crypto currency without legal tender but that crypto currency value is not aligned to the normal legal tender.
“It has a value on its own and some people will say it is not backed by any fundamental but there are many reasons. One of them is that many people just want the freedom to exchange value without having to go through the restrictions of fiat money that is issued by the central banks.
“Also, there’s a political dimension, that is why it is called freedom money. Many people around the world who are protesting for human rights or when regimes try to restrict their rights because crypto currencies do not go through the central bank. They find that they are able to still communicate with themselves and do transactions that bypass sovereign authorities,” he said, adding that central banks have never been comfortable with cryptocurrency.
On the ban, Prof Mrghalu said: “I would have preferred some deep thinking about how to come up with a regulatory framework that restricts the use of cryptocurrency or subject it to some sort of surveillance that alerts the CBN if there are serious abuses that can affect financial system stability. The CBN has to be concerned about the financial system stability and that is what it should be concerned about. So you have to be able to monitor and see if there signs of coming..but to ban a financial institution from having an account associated with cryptocurrwency exchange or cryptocurrency trading seems to me a bit …it was not necessarily the best approach to the problem that is what I think even though I understand why they (did what they did).
He said the ban is symptomatic of regulatory dysfunction because the Security and Exchange Commission (SEC) sees cryptocurrency as financial asset while the CBN does not.
“The SEC recognises cryptocurrency as financial asset and in September last year, the SEC said it would be issuing a refgulatory framework. So it does look like the right hand doesn’t know what the left hand is doing. Then there’s another issue. That is the fact that we a are in a depressed economy. A lot of Nigerians are making a living from trading in cryptocurrency. Many of them, young people, and so there’s an impression created that people in Nigeria make progress, young people especially, they find avenues to be creative and innovative and make progress not because of the government but in in spite of it. And that is really unfortunate,” he said.
Prof Morghalu said the country is one of the 10 countries in the world where trading in bitcoin is popular, stressing that the global value of bitcoin, which is the most popular crytopcurrency is about $560 billion.
