In a February 5, 2021 letter, the Central Bank of Nigeria (CBN) warned all banks in the country that that they are prohibited from dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges.  Thus, all banks and other financial institutions were directed to identify persons transacting in or operating cryptocurrency exchanges and make sure that such accounts were closed.  The letter included a warning that breaches of the directive would “attract severe regulatory sanctions.”

After the letter attracted much criticism from the very active cryptocurrency community within Nigeria, the CBN issued a press release on February 7, 2021, explaining its position.  The CBN first pointed out that there was nothing new in its February 5 letter in that all banks in the country had earlier been forbidden, through CBN’s circular dated January 12, 2017, not to use, hold, trade and/or transact in cryptocurrencies.

The CBN explained that its 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.  The press release quoted Warren Buffet as saying that cryptocurrency is “rat poison squared.”  The CBN also pointed to the supposed dark side of cryptocurrency, saying:

The very name and nature of “cryptocurrencies” suggests that its patrons and users value anonymity, obscurity, and concealment. The question that one may need to ask therefore is, why any entity would disguise its transactions if they were legal. It is on the basis of this opacity that cryptocurrencies have become well-suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion.

Although press release also stated that its actions were not in any way, shape or form inimical to the development of FinTech or a technology-driven payment system, the CBN made clear its distaste for cryptocurrency.  It said, “the CBN has no comfort in cryptocurrencies at this time and will continue to do all within its regulatory powers to educate Nigerians to desist from its use . . . “

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David Zaslowsky has a degree in computer science and, before going to Yale Law School, was a computer programmer. He is currently the Chairman of the Litigation Department of the firm’s New York office. His practice focuses on international litigation and arbitration. He has been involved in cases in trial and appellate courts across the United States and before arbitral institutions around the world. Many of David’s cases, including some patent cases, have related to technology. Since 2008, David has been included in Chambers for his expertise in international arbitration.