Nigeria’s Central Bank Closes Crypto Accounts Citing Threats To Financial Stability

In a letter Friday (Feb. 5), the Central Bank of Nigeria (CBN) ordered financial institutions (FIs) and deposit money banks (DMBs) to close crypto-related accounts immediately.

The CBN reminded these institutions that “dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited,” and any breaches of the order would result in “severe” sanctions.

The central bank further explained the directive in an additional statement on Sunday (Feb. 7) in a response to various comments and reactions, noting the bank is not instating any new restrictions and reiterating that cryptocurrencies have been prohibited since 2017.

The statement, signed by the bank’s Ag. Director of Corporate Communications Osita Nwanisobi, highlighted several issues the bank has with cryptocurrencies, including their unregulated and unlicensed status and their popularity with criminals seeking to launder money, evade taxes, deal in illegal trades and fund terrorism.

“… the very name and nature of ‘cryptocurrencies’ suggests that its patrons and users value anonymity, obscurity and concealment,” the statement read. “The question that one may need to ask therefore is why any entity would disguise its transactions if they were legal.”

The bank also noted cryptocurrencies’ “significant volatility” as a concern, pointing to bitcoin’s recent ups and downs. The CBN also noted that their lack of “market fundamentals,” and the ever-present possibility of the introduction of a new cryptocurrency based on a new mathematical model “may someday crash the price to zero.”

Furthermore, Nwanisobi noted in the statement that Nigeria is “not an outlier” in this view, listing 16 other countries, including China, Saudi Arabia, and Canada, that have restrictions in place on cryptocurrency transactions.

“Even famed investor Warren Buffett has called cryptocurrencies ‘rat poison squared,’ a ‘mirage,’ and a ‘gambling device,’” according to the statement.

In the statement, the CBN also sought to clarify that while it “has no comfort in cryptocurrencies,” this does not reflect its feelings toward FinTech innovation nor a digital payment system. Instead, the bank stated that it has created an “enabling investment environment in the payments system.”