The Central Bank of Nigeria (CBN) plans to develop specific regulation for cryptocurrencies. This decision is motivated by the CBN’s concern for the prevention of money laundering and the financing of terrorism.
The person responsible for these statements was Joseph Nnanna, deputy governor of the CBN’s «Financial System Stability», at an event on Prevention of Money Laundering and Financing of Terrorism (AML/FT) held in the capital of Nigeria (Abuja). In this sense, the deputy governor maintained that the growth that the use of cryptocurrencies as a means of payment is experiencing, together with its volatility and the need for consumer protection, are reasons why the «exchanger» activity must be subject to regulation.
Nnanna adds that cryptocurrencies are dangerous because they are not legal tender, having an intrinsic nature that knows no borders or jurisdictions, thus favoring money laundering.
Another point he addressed is consumer protection. Thus, one of the main points to be discussed, according to the governor, is the problem related to the practical application of the regulation on cryptocurrencies, given the architecture of its computer protocol. Consequently, he argued that consumers are exposed to great risks that are difficult to mitigate.
The FATF highlighted in its report that the use of cryptocurrencies as a means of payment to acquire products and services can make money laundering possible, posing serious challenges when it comes to regulating it.
This concern of the Nigerian government is familiar to us, because when trying to regulate Bitcoin by other governments, Prevention of Money Laundering is one of the main topics on their agenda.
At Law & Bitcoin we agree that the issue of Prevention of Money Laundering is an important issue to address, but that we should not fall into a spiral of «overregulation» fueled by fear of the unknown.
From our point of view, we believe it is necessary that the regulators of each country must make an effort to understand, not only the economic ecosystem in which Bitcoin companies operate (eminently international), but also the technical functioning of this technology. Bitcoin, specifically, due to its operating protocol, traces all the transactions that are carried out on the blockchain. That said, if we put Bitcoin in contrast to cash, Bitcoin can become a solution (and not a problem) to prevent money laundering and terrorist financing. The legal tender money that circulates between bank accounts is perfectly traced, but said traceability ends when that money is withdrawn from an ATM and is paid in cash (as long as it does not exceed 2,500 euros, which is the maximum limit for paying with cash). However, transactions within the blockchain will be recorded permanently and indelibly.
In conclusion, we believe that regulation must go hand in hand with the development of technology to avoid the exodus of Bitcoin companies to friendlier jurisdictions, as is happening in New York with the controversial BitLicenses. In the coming months we will see how governments will try (or should try) to strike a balance where they find themselves, on the one hand the prevention of money laundering and the financing of terrorism and on the other hand the creation of fertile ground for the development of a technology that day after day is acquiring more followers.
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