Nigeria needs to regulate cryptocurrencies, not ban them: vice president

ABUJA (Reuters) - Nigeria’s central bank and securities regulator need to find ways to regulate cryptocurrencies rather than prohibiting their use, Vice President Yemi Osinbajo said on Friday, urging them to come up with a regime that would support growth and innovation.

FILE PHOTO: Nigerian Vice-President Yemi Osinbajo speaks during the swearing-in ceremony at the presidential inauguration in Abuja, Nigeria May 29, 2019. REUTERS/Afolabi Sotunde

The central bank this month barred banks and financial institutions from dealing in or facilitating transactions in cryptocurrencies such as bitcoin, warning that banks which fail to act could face “severe regulatory sanctions”.

The Securities and Exchange Commission (SEC) has meanwhile sought to regulate cryptocurrency investments on the grounds that they qualify as securities transactions.

Both regulators said they had identified certain risks within the digital asset sector, without explaining further.

The central bank has argued that cryptocurrencies, which are unregulated and not legal tender, are risky for the user.

“I fully appreciate the position of the central bank, the Securities and Exchange Commission and ... the possible abuses of cryptocurrencies,” the Vice President Osinbajo said.

“There’s a role for regulation here and it is the place of our monetary authorities and SEC to provide a robust regulatory regime that addresses these serious concerns.”

But addressing top bankers at an online meeting also attended by central bank governor Godwin Emefiele, Osinbajo also said disruption creates efficiency and progress, as has been seen in other sectors.

“Cryptocurrencies in the coming years will challenge traditional banking, including reserve banking, in ways that we cannot yet imagine, so we need to be prepared for that seismic shift,” he added.

Use of bitcoin, the original and biggest cryptocurrency, has boomed in Nigeria in recent years, especially among small businesses, as the weakening naira currency makes it difficult to get the U.S. dollars needed to import goods or services.

Bitcoin has soared over 60% this year, hitting an all-time high of $58,354 this month as mainstream companies such as Tesla Inc and Mastercard Inc have embraced cryptocurrencies.

Digital assets under management across exchange-traded products doubled this month to a record $43.9 billion, researcher CryptoCompare said on Friday, underscoring soaring interest in securities that track digital currencies. [L4N2KW4CM]

Many central banks are considering issuing their own digital currencies although Nigeria’s has not said it is among them. The International Monetary Fund said on Thursday that policymakers should aim to harness the benefits of digital currencies while addressing their risks and legal challenges.

Reporting by Chijioke Ohuocha; Editing by Catherine Evans