Nigeria: Osinbajo redes CBN on cryptocurrency prohibition, calls for robust regulation

Vice President Yemi Osinbajo SAN, virtually delivering his keynote remarks at the CBN/ Bankers Committee's Initiative for Economic Growth on Friday, February 26, 2021. Photo: State House/Tolani Alli

Nigeria’s Vice President Yemi Osinbajo has called for a “robust regulation” of digital currency in the country’s financial system, against the prohibition of this cryptocurrency by the Central Bank of Nigeria (CBN).

Prof. Osinbajo, speaking at the Bankers Committee Vanguard on Friday, on a range of issues which also focused on the operations of cryptocurrency in Nigeria, he said, there was a need for it to be regulated instead of placing an outright ban on it.

He said: “On the very topical issue of blockchain technology, digital assets, and cryptocurrencies let me say two things.

“First is that there is no question that blockchain technology generally and cryptocurrencies, in particular, will in the coming years challenge traditional banking, including reserve banking, in ways that we cannot yet imagine so we need to be prepared for that seismic shift and it may come sooner than later. Already, remittance systems are being challenged. Blockchain technology will provide far cheaper options for the kind of fees being paid today for cross-border transfers.”

The Vice President contended that, “I am sure you are all aware of the challenge that the traditional SWIFT system is facing from new systems like Ripple, which is based on the blockchain distributed ledger technology with its own crypto tokens. There are, of course, a whole range of digital assets spawned daily from blockchain technology.

“Decentralized finance, using smart contracts to create financial instruments, in place of central financial intermediaries such as banks or brokerages is set to challenge traditional finance. The likes of Nexo finance offer instant loans using cryptocurrency as collateral.

“Some reserve banks are investigating issuing their own digital currencies. Clearly the future of money and finance, especially for traditional banking, must be as exciting as it is frightening. But as we have seen in many other sectors, disruption makes room for efficiency and progress.”

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He explained further that, “I fully appreciate the strong position of the CBN, SEC, and some of the anti-corruption agencies on the possible abuses of cryptocurrencies and their other well-articulated concerns, but I believe that their position should be the subject of further reflection.

“There is a role for regulation here. And it is in the place of both our monetary authorities and SEC to provide a robust regulatory regime that addresses these serious concerns without killing the goose that might lay the golden eggs. So it should be thoughtful and knowledge-based regulation not prohibition. The point I am making is that some of the exciting developments we see call for prudence and care in adopting them, but we must act with knowledge and not fear,” he said.