"Why CBN does not want Nigerian banks to deal with crypto"

" \n Why CBN does not want Nigerian banks to deal with crypto \n \n\n \n Nigeria\u2019s central bank recently\u00a0fined lenders\u00a0for failing to follow regulations that prohibit customers from transacting in cryptos. \n \n\n \n The apex bank introduced the penalties to ensure commercial lenders implement a\u00a0February 2021 order\u00a0to block crypto trading because of the threat they deem cryptos to pose to Nigeria\u2019s financial system. The introduction of the eNaira by the CBN in October 2021 is yet to impact Nigeria\u2019s flare for cryptocurrency, however. \n \n\n \n Chainalysis reports that Nigeria has the highest proportion of retail users who make transactions under $10K. \n \n\n \n Bitcoin has been the subject of controversy among the elites of traditional finance since its introduction in a whitepaper in 2008. For cryptocurrency enthusiasts, the launch of cryptocurrencies marks the arrival of a new and equitable monetary system. \n \n\n \n The CBN earlier pointed to\u00a0cryptocurrency\u2019s role in criminal activity\u00a0and the lack of legal recognition as justification for opposing the digital asset. \n \n\n \n The CBN\u2019s mandate \n \n\n \n In Nigeria, the CBN is primarily responsible for financial stability, handling the financial ecosystem through its monetary policies. \n \n\n \n There is a chain of trust between transacting parties in the Nigerian economy, which involves borrowers, lenders, and consumers. As the final link in the chain, the CBN is also known as the lender of last resort. \n \n\n \n The CBN distributes and regulates money in an economy through intermediaries, such as banks and financial institutions. Their control of the enterprise-level payment infrastructure and settlement systems allows them to dominate the domestic payment system \n \n\n \n This power balance has so far held. However, the advent of crypto and the abridgement of settlement systems that respect jurisdictional borders, however, threatens to unbalance the domestic and international realms. \n \n\n \n Read: Lands Ministry engages Otumfour on $850m Newmont Ahafo-North Project \n \n\n \n CBN\u2019s issue with crypto \n \n\n \n Cryptocurrencies are clearly not liked by the CBN. They offer alternative money, which is an intrusion into their turf. This is why the Bank for International Settlements, the central banks\u2019 bank, does not look favourably on innovation. \n \n\n \n Bitcoin\u2019s network can streamline the process of creating and distributing currencies, rather than relying on a centralized infrastructure like that operated by the CBN. Home computers can generate bitcoins. \n \n\n \n Peer-to-peer transfers between Bitcoin addresses do not require intermediaries. The distribution of cryptocurrency does not require a network of banks chartered by a central authority. \n \n\n \n In contrast, cryptocurrencies are a decentralized means of establishing trust. They share authority within the network rather than relying on centralized validation as seen on the CBN\u2019s network. \n \n\n \n As opposed to bank and central bank ledgers that are held centrally, a distributed ledger (among users) records all transactions in an ever-lengthening set of digital blocks called a blockchain. \n \n\n \n \u2018Miners\u2019, or key holders, are paid a fee for adding another digital block to the distributed ledger, which is verified by a network of users and miners. \n \n\n \n Naturally, Nigerian banks are unhappy about being made obsolete, and they are working with the CBN to clamp down on crypto after initially dismissing them out of hand. \n \n\n \n It is generally the bank\u2019s policy to charge fees for any action they take with money, even just keeping in a bank account. \n \n\n \n Because banks have built a level of trust that transactions pass smoothly and everything is accounted for, but crypto is changing that and weakening their grip on many young Nigerian citizens that make a large junk of the population \n \n\n \n What Crypto supporters say \n \n\n \n Bitcoin supporters argue that the Central Bank of Nigeria is creating money out of thin air, the currency is unbacked by tangible assets. They claim the CBN manipulates the supply of money to create inflationary pressures and asset bubbles in the economy. \n \n\n \n Because imports could lower the value of a currency, capital controls were often instituted by the CBN. Others view it as another way for the CBN to exert control over economic and fiscal policy. \n \n\n \n As a result, the stateless nature of bitcoin is useful for circumventing capital controls and exporting wealth. \n \n\n \n Bottom line \n \n\n \n The crypto market has become a hot button issue for the Nigerian apex bank, and it alternates between criticizing it and investigating its application. \n \n\n \n While it may have the potential to decentralize and change the functioning of the existing financial infrastructure, Nigeria\u2019s apex bank is still wary of it. \n \n\n \n In the meantime, bitcoin will continue to provoke distrust and criticism from established authorities like the CBN until its ecosystem matures and it has a clear use case. \n \n\n \n In that regard, the CBN needs to understand that the crypto market could prove to be a powerful ally in solving the financial puzzles many unbanked Nigerians face. \n \n\n \n With full knowledge that they provide cheaper, faster, and secure cross-border money transfers. \n "

"Why CBN does not want Nigerian banks to deal with crypto"

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