EXCLUSIVE: CBN investigates banks involved in crytpo trading

The Central Bank of Nigeria (CBN) has launched an investigation into financial institutions offering services to cryptocurrency traders, TheCable understands.

On Monday, the bank sent out examiners to start looking into the books of the banks.

“Banks are not allowed to offer services to unregulated businesses and crypto trading is one of such,” a senior official of the bank told TheCable.”

According to him, it was recently discovered that an America-based fraudster collected business survival loans of about $500,000 from the US government using hurriedly registered companies.

He then allegedly discounted $100,000 of it in order to move $400,000 through a Nigerian financial institution by using a crypto currency.

“We are seeing clearly established patterns of money laundering, and we are worried about possible terror finance,” the official told TheCable.

A CBN circular of January 12, 2017 had warned deposit money banks and other non-financial institutions in the country on the risks associated with cryptocurrency transactions.

Some of the banks, however, may have breached this financial regulation which does not allow them to be involved in unregulated services.

According to the CBN, cryptocurrencies pose risk of loss of investments, money laundering, terrorism financing, illicit fund flows and other criminal activities.

The CBN’s position on cryptocurrencies is not an outlier, as many countries’ central banks, international financial institutions, and distinguished investors and economists have also warned against its use and placed a certain level of restrictions on facilitating cryptocurrency transactions.

Christine Lagarde, president of the European Central Bank, recently called for global regulation of Bitcoin, saying the digital currency had been used for money laundering activities in some instances, and that any loopholes needed to be closed.

“(Bitcoin) is a highly speculative asset, which has conducted some funny business and some interesting and totally reprehensible money laundering activity,” she had said.

CBN has vowed to continue to do all within its regulatory powers to educate Nigerians to desist from the use of cryptocurrencies — despite growing criticism.

“In light of the fact that they are issued by unregulated and unlicensed entities, their use in Nigeria goes against the key mandates of the CBN, as enshrined in the CBN Act (2007), as the issuer of legal tender in Nigeria,” CBN said.

“More also, repeated and recent evidence now suggests that some cryptocurrencies have become more widely used as speculative assets rather than as means of payment, thus explaining the significant volatility and variability in their prices. 

“Given that unlike Fiat Money which accompanied by full faith and comfort of a country or Central Bank, cryptocurrencies do not have any intrinsic value and do not generate returns by themselves.”