Is Cryptocurrency Legal In Nigeria? Actions Towards The Regulations Of Cryptocurrency In Nigeria – Technology

While banks and other financial institutions are prohibited from
dealing in cryptocurrencies in Nigeria, cryptocurrency has not been
termed illegal, but it is unregulated. Engaging in cryptocurrency
transactions does not constitute illegal activities, but what
the user does with the cryptocurrency in the transaction determines
whether it is unlawful or not. No specific regulation in Nigeria
has declared cryptocurrency trading illegal or criminalized it.

The Central Bank of Nigeria (CBN), Nigeria’s financial
market’s regulator, does not recognize cryptocurrencies and
hence does not have a regulatory framework or licensing regime in
place for cryptocurrency operators.
According to CBN in a circular issued to banks and other financial
institutions on January 2017
about cryptocurrencies or
virtual currency operations in Nigeria, cryptocurrencies are
largely untraceable and anonymous, and they are vulnerable to abuse
by criminals, particularly in money laundering and terrorism
financing.

The Central Bank of Nigeria (CBN) has recently sent a letter to
banks and other financial institutions in February 2021, stating
that trading in cryptocurrencies and enabling payment for
cryptocurrency exchanges are banned. The CBN also directed all
banks and other financial institutions to identify and cancel the
accounts of individuals or businesses who deal in cryptocurrencies
or run cryptocurrency exchanges.

The CBN claimed that cryptocurrencies are created by unregulated
and unregistered companies, and hence usage in Nigeria violated
existing laws since they are not legal money. CBN also recognized
cryptocurrency anonymity as a problem. It said that the anonymity
and absence of KYC rendered cryptocurency vulnerable to illicit
usage, such as money laundering and terrorism funding. Another
rationale was the volatility of cryptocurrencies, which it claimed
jeopardized the stability of other countries’ financial
systems.

In response to the CBN’s instruction, banks have begun to
identify and deactivate accounts of people having cryptocurrency
exchange inflows/outflows. It is unclear if impacted customers will
be able to reestablish accounts with their banks in the future.

The Securities and Exchange Commission (SEC), which initially
announced its intention to regulate “digital assets such as
cryptocurrencies,” recently stated that it would collaborate
with the CBN to analyze and better understand the identified risks
of cryptocurrency in order to ensure that appropriate regulations
are in place if cryptocurrency transactions are permitted in the
future.

Regulation of
Cryptocurrencyin Nigeria

It has been discovered that the link between anonymity,
cryptocurrency, and criminality stems from the fact that the usage
of cryptocurrency exposes users to cyber-attacks such as Denial of
Service (DoS) assaults, theft, release, or modification of
sensitive data. Furthermore, the anonymity offered by cyberspace
allows for a lack of self-regulation, which may result in unethical
conduct.

There are a number of criticisms leveled at cryptocurrencies,
the most common is the link to criminal activities associated with
its use. It has also been shown that the nature of cryptocurrencies
makes them ideal for a variety of criminal operations such as money
laundering, tax evasion, drug trafficking, and so on.

Unfortunately for regulators,cryptocurrencies
are built on the idea of decentralization
, which means that
they are intentionally designed in a way that prevents them from
being controlled by a central authority in the same way that
traditional currencies are. At present, there is no standard
worldwide framework to regulate virtual currencies. Its regulation
is largely dependent on the efforts of individual countries.

In response to cybercrime, the usage of cryptocurrency has
generated global concerns about consumer data protection.
The
“Cybercrimes (Prohibition and Prevention) Act,
2015″has a significant impact on cyber law in
Nigeria. This Act creates a comprehensive legal, regulatory, and
institutional framework in Nigeria to prohibit, prevent, detect,
prosecute, and punish cybercrime. The Act also encourages
cybersecurity and protection of computer systems and networks,
electronic communications, data and computer programs, intellectual
property, and privacy rights, as well as the protection of
important national information infrastructure.

According to the Nigerian Cyber Crime (Prohibition, Prevention)
Act 2015, all financial institutions, including Fintech companies,
must verify the identity of customers involved in electronic
transactions, integrate and implement know-your-customer (KYC)
processes, and keep all subscriber data safe for two (2) years.

Furthermore, the Consumer Protection Framework of the Central
Bank of Nigeria (CBN) mandates all financial institutions regulated
by the CBN to preserve private consumer data and adopt measures to
prevent unlawful disclosure of such data. However, there is a
distinction to be made between data protection and untraceable
data.

Globally, data protection regulations are designed to protect
consumers’ personally identifiable information. This implies
that the information may be traced back to specific individuals,
and the financial institutions concerned are obligated to make this
information accessible when requested to do so by a law enforcement
agency.

The use of crypto-currency extends beyond data protection and
into the world of untraceable data. Several governments have
prohibited the use of crypto-currencies inside their borders, while
others have warned the public against it, claiming that
crypto-currencies cannot be controlled, while yet others have
approved the usage of these digital currencies and subjected their
use to Fintech laws.

The Securities and Exchange Commission (SEC), the main
regulatory body for the Nigerian capital market, issued a
statement on Digital Assets, their classification and handling,
with primary concern on cryptocurrency regulation in Nigeria.
The Commission stated that it would regulate innovation in the
crypto currency sector in three ways: safety, market deepening, and
providing solutions to issues that will lead its regulations,
strategy, and interactions with innovators seeking legitimacy and
relevance in this growing industry.

As a result, the SEC published regulatory guidelines for digital
currencies and crypto-based companies or startups, indicating that
they will supervise crypto-token or crypto-coin investments where
the nature of the investments qualifies as securities
transactions.

According to the Commission’s statement, the
regulations’ goal is not to impede technology or innovation,
but to establish norms that encourage ethical behavior. In a
previous statement, the SEC warned stakeholders and the investing
public against dealing with fraudulent, unregistered investment
schemes and capital market operators, particularly those making
bogus investment and unjustifiable return claims, and advised the
public to tread carefully to avoid being swindled.

Despite repeated warnings, the CBN took significant measures by
forming a committee to examine and define a road map for blockchain
and cryptocurrency regulation, as well as the potential safety when
utilized as a valuable asset in accordance with global
practices.

Nigeria is yet to establish a legal framework or legislation for
cryptocurrencies or crypto exchanges; nevertheless, there is a
strong desire to do so very soon. Following the actions of the CBN
and SEC, Nigerian lawmakers have asked the regulatory bodies to
expedite efforts to establish a legal framework for crypto
currencies in the country.

In Conclusion:

Almost every financial transaction in the world has legal
ramifications, and cryptocurrency is no exception. The uniqueness
of the currency has undoubtedly contributed to the problems
connected with its global regulation.

With these changing global financial trend, Nigeria’s
financial regulatory agencies should take the lead in building a
solid financial system and regulation that would accept
contemporary technology. And, despite the potential for abuse
connected with crypto currency trade, it should not be rejected in
its entirety; rather, rigorous regulations should be put in place
to limit its misuse.

Meanwhile, by claiming that cryptocurrencies are not legal
tender in Nigeria, the Central Bank of Nigeria (CBN) is essentially
indicating that cryptocurrencies are not officially recognised as
money in Nigeria, but that they are not unlawful.

Aside from the influence of the Cyber Crime Act 2015, the
Securities and Exchange Commission (SEC) cooperating with the
Central Bank of Nigeria (CBN) to regulate cryptocurrency trading is
a laudable effort toward building a legal framework for
cryptocurrencies in Nigeria. More regulatory action is
required.

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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.