Blockchain committee seeks review of crypto regulations in Nigeria

Cynthia Ezekwe

The Blockchain Industry Coordinating Committee of Nigeria (BICCoN) has called on the government to engage in constructive dialogue with the blockchain and cryptocurrency sector to develop a regulatory framework that protects consumers while fostering innovation and investment.

Binance’s recent decision to stop its services for the Nigerian Naira has brought to light ongoing issues between the Nigerian government and the cryptocurrency industry. The latest incident has led to concern among industry experts and observers, who fear that the actions of the Nigerian government could stifle innovation and investment in the country’s burgeoning cryptocurrency sector.

The Nigerian government blocked access to Binance’s operations in the country over allegations that the cryptocurrency exchange platform was involved in manipulating the value of the Nigerian Naira. The move was the latest in a series of actions taken by the government to restrict the use of cryptocurrencies in Nigeria. The government had previously issued a directive to banks to stop providing services to cryptocurrency exchanges, which Binance had been accused of circumventing.

Addressing the issue in a statement, BICCoN expressed concern that the Nigerian government’s actions will drive cryptocurrency and other virtual asset activities underground, rather than regulate them effectively. BICCoN’s chairman, Lucky Uwakwe, stated that the government should approach the regulation of virtual assets with caution, and work with industry stakeholders to develop a robust regulatory framework.

According to BICCoN, the Nigerian government’s actions could have the unintended consequence of driving virtual asset adoption and transactions underground. This would make it difficult for regulators to effectively monitor and supervise the sector, and could lead to an increase in criminal activity and other risks. BICCoN urged the government to take a more measured approach to regulation, in order to create a level playing field for all stakeholders.

The intercommunity working group further addressed six key issues including: 

-The order by the Nigerian government to telcos and ISPs in the country to block access to virtual assets websites, including Binance.com, Coinbase.com, Kraken.com, etc.

-The detention of two foreign Binance executives by the National Security Adviser (NSA)

-The over $26 billion  disclosed by the CBN to have been channeled through Binance in the last one year

-The $10 billion reportedly imposed by the Nigerian government over Binance’s alleged illicit activities in the country

-The blockchain industry’s self-regulatory approach for consumer protection, investor safety, and national interest

-Availability of industry stakeholders for a dialogue with the CBN, SEC, NSA, and other relevant agencies in Nigeria

BICCoN also highlighted the undemocratic and unconstitutional nature of blocking access to websites that have not been criminalized by law. It noted that while such actions may offer temporary relief, they ultimately erode trust and confidence, and undermine the principles of democracy. 

The committee appealed to the federal government to reconsider its stance and possibly review its decision by directly engaging VASPs in the country towards adopting a more collaborative and transparent approach to the challenges presently being faced by the country, adding that adopting more open multi-stakeholder engagements regarding the risks and threats of the activities of VASPs in the country would benefit all stakeholders better, including the government and the members of the public 

In response to a report from the Central Bank of Nigeria (CBN) that claimed that $26 billion had been channeled through Binance in the past year, BICCoN argued that this claim is not supported by evidence. The committee pointed out that there are various tools available to the CBN and other agencies to trace cryptocurrency transactions. 

“The (public) impression that $26 billion is untraceable or has disappeared because it is related to virtual assets is untenable. We believe that what the CBN Governor was trying to point out is that the huge funds did not pass through the traditional channels where the CBN has direct supervision. For direct supervision, this is a function of regulation,” BICCoN stated.

BICCoN stressed that it is not in support of any illegal activity involving virtual assets, including money laundering, terrorism financing, fraud, and scams. The committee acknowledged that bad actors exist in the sector, but noted that the majority of users are law-abiding citizens who are simply trying to participate in the digital economy.

To address the problem of illicit activity in the cryptocurrency space, BICCoN proposed a number of measures, including the implementation of an enabling licensing framework, streamlined regulatory requirements, and a risk-based approach to regulation, in line with the recommendations of the Financial Action Task Force (FATF). 

BICCoN emphasised that it is ready and willing to engage in dialogue with the Nigerian government, regulators, law enforcement agencies, and other relevant stakeholders in order to promote innovation and economic growth. 

“It is our position that while the activities of virtual asset service providers (VASPs) may present risks to our financial system, proper regulation and enforcement is a more efficient and effective way to safeguard the financial system and secure the economy in the long run. Of course, where the activities of any player constitutes real or potential threat to the financial system, regulators must, understandably, act to safeguard the system against fraud, scams, and other illicit activities,’’ the committee noted.