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Wednesday, January 26, 2022

Cryptocurrency: Challenges Of Digital Financialism, Capitalism – Legal Perspectives

Azubuike Ihemeje -Abuja

Let me from the onset, respectfully place this caveat;

If you know, you’re so strongly fanatical about the CBN’s latest policy to outlaw crypto transactions in Nigerian banks,

Or

You’re opposed to, or very much averse to legal regulations, statutory protections, and legitimate legal frameworks for your financial dealings,

Or

You feel that the bureaucracy of legally protected financial policies are simply unnecessary and therefore should be relaxed, circumvented or even be relegated for you;

Please, please, and please, kindly don’t bother reading this piece.

Because, I’m not only going to irritate, annoy and provoke you, I’m also going to break your heart into 6000 times, less one.

First.

What is Cryptocurrency?

It has been rightly defined as a digital currency. You may call it a medium of exchange, in which transactions are basically verified, and their records, loosely maintained by a decentralized system, that uses cryptography as a guide, rather than by a centralized authority; like the CBN, in case of Nigeria, or Federal Reserve System in the US or the Bank of England in the UK.

It merely operates via decentralized cryptocurrencies such as bitcoin, which now provide an outlet, or medium for personal wealth that is clearly beyond either territorial restrictions, and or even confiscation in the event of tracking by law enforcement agencies.

Again,

It’s germane to emphasize, before the Hoodlums will start;
that; the purpose of this article is not to dabble into the lybrinthes, nuances and the highly complicated irregular network of cryptocurrency’s esoteric complications.

Suffice it to say that, the cardinal purpose of this little contribution, is purely on legal perspectives.

By legal perspectives, I mean;

What legal framework governs the practice or operations of Cryptocurrency in Nigeria?

What international or municipal laws, guide, protects, or regulates the activities of crypto?

Please, don’t just bother to tell us how it works, like this and like that.

The answers to the above questions are; big big NONE!

Nothing. Absolutely nothing gummed crypto, legally speaking.

I don’t want to say that crypto is a the highest, internationally graduated level of Ponzi scheme.

I don’t want to be convicted for being insensitive, if not, I would have said that crypto is advanced unregulated digital financial schemes, without any legal protection, but had over time, and practice, attempted to assume the unwritten, unlegislated, and unconventional financial schemes that rules the world, financially.

But, suffice it to say;

Crypto in all its ramifications is a rampaging digital financial scheme, which has radically created its own rules, exchange, stocks, shares, just name it; without any recourse to existing financial institutions, nor legal frameworks in every financial jurisdictions they invaded.

You must gree their own by force, by fire.

For the pioneers are very digitally sophisticated and savvy, that they equally rule the modern world of digital technologies and communications.

They’re financial system scavengers, for they conclude their transactions with their bitcoins, and whatever nomenclature they deem fit, yet foist it on various existing banks to convert values to the particular legal tenders, prevalent in each country.

They’ll often, always invade banks and mop up every available hard currencies, to prosecute their foreign exchange. Everything about them is convert, convert for me.

They really don’t care about the lifeline of other real sectors, and their businesses how they survive to secure foreign exchange.

Cryptocurrency remains the fastest, highest and most variable conduit pipe for unrestricted, untraceable money laundering, world over.

You can’t beat them.

It’s a very powerful syndicate web of sophisticated software, with extremely wiz and digital financial schemes, that gives little or no regards to any legal framework.

They use our banks, but repudiate every legal framework regulatory authority thereof.

Talk of financial system Hoodlums, and invaders!

So, it was actually not surprising that Nigeria’s apex bank, the CBN, had to proscribe and outlaw their voracious practices within the precincts of Nigerian banks. Although, belatedly.

In fact, it is long over due.

Nigeria is not the first, nor the only Sovereign Country that has banned, and outlawed Cryptocurrency within its jurisdiction.

America 🇺🇸
UK 🇬🇧
China 🇨🇳
Canada 🇨🇦
Russia 🇷🇺
South Africa 🇿🇦
Germany 🇩🇪

And a host of many countries have, separately, but unanimously rejected and proscribed cryptocurrency transactions within its territories and banks.

For example;

USA

FCA, which is our Nigeria equivalent of CBN, prohibits sale of unregulated digital instruments, cryptocurrency and derivatives. to retail customers. The prohibition which came into effect on 6th January 2021 reinforces existing regulations that prohibited sales of high risk and highly volatile assets to retailers lacking appropriate risk bearing threshold (Bitcoin is one of the unregulated digital instruments affected by the FCA ban).

The FCA considers these products to be ill-suited for retail consumers due to the harm they pose. These products cannot be reliably valued by retail consumers because of the following dangers:

>>Inherent nature of the underlying assets, which means they have no reliable basis for valuation.

>>Prevalence of market abuse and financial crime in the secondary market (eg cyber theft).

>>Extreme volatility in cryptoasset price movements.

>>Inadequate understanding of cryptoassets by retail consumers.

>>Lack of legitimate investment need for retail consumers to invest in these products.

These features mean that retail consumers might suffer harm from sudden and unexpected losses if they invest in these products.

Canada

Canada’s financial authorities recognize trading in virtual currencies as ‘money business services’ but does not recognize cryptocurrencies as legal tender. Canada allows for use of digital currencies to pay for goods and services online and in stores but such exchange operates under the ‘rule of barter’.

>>Canada treats crypto currencies as ‘commodities’ and allow for licensed trading in the commodity.

>>Trading in crypto is recorded, reported and taxed

China:

China does not recognize digital currency as legal tender and the banking system does not accept it. However China is ahead in the drive to have sovereign Cryptocurrencies. Meaning that when it is ready the Chinese Government intends to introduce a digital version of the Yuan which is their official legal tender.

South Africa

As of now South Africa does not issue or control trading in digital currencies. However, towards the end of 2020 a South Africa financial sector working group examined the prospects of the emerging business in virtual currencies and reported that as follows;

>>Crypto assets and the various activities associated with this innovation can no longer remain outside of the regulatory perimeter, or legal frameworks.

>>Clear policy stances must be formed, and legislated in order to protect innocent, vulnerable people from the sharks of dangerous digital criminals.

———————————————————————

So, you can see that Nigeria is not an exception.

Several sovereign countries have outlawed cryptocurrency before now.

They say Cryptocurrency is the future, and that the future is here already.

No wahala!

I can understand the craze for digital monetary transactions.

I can imagine the limitless amount of freedom, and unrestricted access that comes from seating at the comfort of your house or in vacation, and be running things through your phone, without hindrance.

We all surely do welcome such liberties.

But, it can’t be successfully possible without a well defined legal framework, that would protect all and sundry.

You recall, how randomly rampant banks used to wind up and vanish into thine air with depositors money, until 2004, when CBN can with stiffer, secured, capital base backup with strong legal frameworks.

That was how Nigeria banks became safer and stronger till date. And nobody is scared. You no longer sleep with one eye 👁 open merely because you don’t know whether your bank will shutdown the next minute and disappear with your little bread you deposited.

Nigeria Stock Exchange, also went through same capitalization policy, and have felt better for it.

Even, Federal Government Bonds, received some legal touch to protect participants.

I don’t know of any financial scheme worldwide that’s so let on the loose right now, except Cryptocurrency.

Therefore, rather than dwell in needless, unproductive, and unprofitable media outrage against CBN, why not you cryptocurrency people, gather your thoughts, opinions and acts together; prepare some watertight bills to govern the activities of cryptocurrency in Nigeria, for the National Assembly, and then lobby your legislators to pass it into law.

You can do it.

Spare some time off Twitter and the rest, and I’m very sure you will succeed.

By the time it becomes legal and protected by a legal framework, no CBN nor federal government shall stop you any longer.

Everything is possible, especially when it’s governed and protected by the law.

Indians have already achieved their own legal framework for cryptocurrency.

You should even blame yourselves, for carrying on with such huge financial schemes, without first seeking to legitimatize it’s operations in Nigeria.

Gentlemen, stop sounding like a broken record or be acting like a kid whose much cherished candy was snatched away in a nightmarish dream, only to wake up and want to bring down the roof of the entire house.

You never sought the CBN approvals, authorizations nor even acquiescence before embarking on cryptocurrency;

Why do you expect the CBN to seek for your consent to discharge its legally empowered duty of regulations on the bank, and got rid of undesirable, unregulated, and dangerous financial schemes?

It’s not that deep my beloved brother.

It’s never seriously deep like that.

————————————

Next: we shall examine the inherent dangers of Capitalism being virtually extinguished by unbridled practices of Financialism.

Catch you, whenever I can.

Bye 👋

 

Azubuike Ihemeje is an astute Legal luminary cum writer, with a deep and unique insight into business and financial institutions and services.

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