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VANGUARD ECONOMIC FORUM SERIES on Fintech: Why trading in cryptocurrency is not legalised in Nigeria — CBN

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…says Nigerian banks are in forefront  of tech adoption

By Peter Egwuatu, Nkiruka  Nnorom,  Princewill Ekwujuru,  Providence Emmanuel  Elizabeth Adegbesan, &  Juliet Umeh

The Central Bank of Nigeria, CBN, yesterday said that trading of cryptocurrency is not recognised business in the Nigeria because all over the world, financial sector regulators have rejected its inclusion in the formal financial services industry.

The apex bank, therefore warned Nigerians against trading in cryptocurrency including its down-line variants such as bitcoin, which they said carry huge risks that cannot be insured or regulated.

Speaking at the Vanguard Economic Forum Series on Financial Technology (FinTech) in Lagos, the Governor of CBN, Godwin Emefiele, however, said that Nigerian banks are at the forefront when it comes to embracing Information Communication Technology (ICT) and digital services.

Emefiele, represented by the Director Banking and Payment System Department of the CBN, Dipo Fatokun said:  “We have not seen any country where cryptocurrency is regulated.”

While answering question on where does the CBN stand as it relates to adopting block-chain technology and cryptocurrency in Nigeria, Emefiele, stated:  “Block-chain, yes, is a distributed ledger technology, we are at home with it and we know it could be used for many good things especially in the financial services industry. We are not at home with cryptocurrency, and why?

Because as you know, there is no issuing authority and so if as a CBN we agree that anybody can use cryptocurrency, how do we regulate it? “So that is one of the limitations of cryptocurrency and of course you will also agree with me that  handling or putting value to the use of cryptocurrency has been an issue. It has been an issue because most of them, the leading one of them is the bitcoin  is limited on supply.  So how would that fulfil the requirements of money?   “But the other side of it is known as Central Bank Digital Currency (CBDC).

The Reserve Bank of England, the Central Bank of Canada, the Monetary Authority of Singapore have done research. Some of them have even done what we call the proof of concept, but the conclusions they have all arrived at is that it is not the way to go for Central Banks”.

Commenting on Mobile Money, he said: “The CBN is currently reviewing the structure and processes of mobile money to make us become  more responsive to the emerging new financial services landscape.

“We are positioning our people to respond effectively to the emerging risk while also observing the payment system security and risk management to effectively ensure that the banking system is alert to the challenge of the more inclusive financial services sector. The CBN is also evaluating the possibility of implementing a regulatory standard as has been done in some jurisdictions. This is to give proper structure and approach as we have always adopted in admitting non-bank players in the payment services space.

“We reckon that to facilitate financial inclusion the banks need to approach FinTechs with the paradigm of inclusiveness. In that regards we are adopting a risk base approach in regulating and supervising FinTechs that are under our purview.

“Indeed our financial inclusion strategy is relying on non bank service providers to accelerate access to financial services. The bank will therefore continue to provide the facilities for non bank service providers within the new risk base regulatory frame work.

“We are not unaware that FinTechs operate across regulatory jurisdictions within the financial services industry; we are therefore engaging other regulators across the financial services landscape as well as the ICT sector to collaboratively address the risk being introduced by innovators within the financial services sector.

“Indeed our financial inclusion strategy is relying on non bank service providers to accelerate access to financial services. The bank will therefore continue to provide the facilities for non bank service providers within the new risk base regulatory frame work.

  “We will continue to strengthen collaboration and ensure that we have a robust interface to reduce regulatory inhibitions and enhance time to market for the new entrants.

“We are recording the progress that our FinTechs have made in advancing foreign direct investment in our effort to further support them. We have included them within our intervention scheme.

“In fact, some of them have benefitted under the Shared Agent Network Expansion Facility (SANEF) in addition to the agricultural and small and medium enterprises investment scheme as a window for ICT.

“We in CBN will continue to encourage banks to mentor the FinTechs and avail them the opportunities within our intervention scheme.”

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