Cryptocurrency has been one of the most trending concepts in the world of ICT over the past decade and is still building momentum with each passing day due to its ability to give individuals a sense of control and freedom with respect to their finances. However, this freedom has become a source of worry for governments the world over who have been pro control since time immemorial. In this article, I will be specifically focusing on Nigeria and the views of the government institutions with respect to cryptocurrency's legality in Nigeria.

The topic of this article might arouse the curiosity of many who might have mixed feelings with respect to cryptocurrency's however I will ensure to be as objective as possible in my assertions.

To kick off the article, on Wednesday 17th August, 2022, the Economic and Financial Crimes Commission (EFCC) a law enforcement agency setup by the Nigerian government to fight corruption, hosted a program on twitter spaces tagged: What is illegal in cryptocurrency?

The event had me curious and eager to tune due to the fact that as a member of the Blockchain Nigeria user group (BNUG) and the Nigerian cryptocurrency community in general, it isn't anything new to hear that people are being harassed by law enforcement agencies for being in possession of cryptocurrency. Most crypto users in Nigeria have become quite weary of the law enforcement agents due to the belief that most of the law enforcers consider crypto possession as evidence of being involved in cyber crime A.K.A Yahoo Yahoo in Nigerian local parlance.

Therefore, I was eager to tune in and listen to what the EFCC had to say with respect to this development as the information coming from the EFCC will be of paramount importance to cryptocurrency users in Nigeria.

So, starting off with my observations from the EFCC twitter space. First off, the one major thing I appreciated was the fact that the representatives of the organization admitted that cryptocurrency has come to stay. Now, we all know this but hearing this from a Nigerian government agency was like having butterflies in my tummy.

I mean, just in 2021, the Central Bank of Nigeria had issued a circular that flagged cryptocurrency transactions as illegal. This singular act led to the mass exodus of many cryptocurrency exchanges that could no longer operate due to the fact that Nigerian banks shut down collaborations with these exchanges prior to the circular.

Now, the same circular equally brought about enforcement from the EFCC and the police against law abiding citizen who deal in cryptocurrency.

Therefore, hearing the EFCC making the admission that cryptocurrency has come to stay was like music to my ears.

They equally talked about somethings that I feel are pertinent to how the space is viewed in the cryptocurrency space like people utilizing cryptocurrency for illegal activities like money laundering and terrorism finance but according to the United Nations report that about $42 trillion of fiat currency is laundered every year while, Chainanalysis reports $8.6 billion worth of crypto is used for money laundry annually. This clearly shows how much the EFCC is yet to understand with respect to the cryptocurrency space.

From this submission, it's clear the EFCC and other Nigerian law enforcement institutions have very little understanding of the cryptocurrency and blockchain space. This is a very concerning situation which has led to alot of individuals suffering as a result of this lack of proper understanding on the part of the law enforcement agencies.

However, I believe the crux of the matter on the illegality of cryptocurrency in Nigeria stemmed from the circular issued by the Central Bank of Nigeria (CBN) which banned cryptocurrency transactions from utilizing the existing funding routes i.e banks. This major reason alone is why banks and law enforcement agencies in Nigeria frown against cryptocurrency users in Nigeria. Now, the central bank of Nigeria's argument on banning cryptocurrency stems from the argument that cryptocurrencies serve as a means to facilitate fraud and terrorism. This we know is absolute falsehood as highlighted from the statement of the United Nations above.

The initial plan to kick against cryptocurrency was mainly hatched during the end SARS protest in which cryptocurrency was utilized in circumventing the CBN's blocking of bank accounts. Therefore, since the CBN like every other government institution in the world has no jurisdiction over crypto transactions, it became a cause of anger in government quarters which is why they took the only step they felt they could take in killing off cryptocurrency.

However, from all indications they haven't been successful in this regard as from the moment the CBN decided to shut down direct interraction of banks with cryptocurrency exchanges, the exchanges reverted to the peer to peer (P2P) system of transaction which according to investopedia, a peer-to-peer (P2P) service is a decentralized platform whereby two individuals interact directly with each other, without a third-party intermediary.
This caught the CBN by surprise has they hadn't anticipated this switch but obviously at this point, they had won the battle but lost the war.

Now, knowing all this, the government agencies (regulators and law enforcement)need to understand the attributes of cryptocurrency and how it can be utilized to fight illegality and corruption as a whole.

Most of the arguments held by the Central Bank of Nigeria against cryptocurrency is quite flawed and bereft of proper facts. For example, the idea that cryptocurrency transactions are untraceable is quite flawed due to the fact that cryptocurrency leverages upon blockchain technology which helps to keep track of transactions. Now utilizing this fact it therefore means that transactions can be traced. It is understandable that there's no link between cryptocurrency wallets and identity due to the decentralized nature of wallets but it's still very trackable as there's interraction between decentralized wallets and centralized exchanges which now mostly employ a know your customer (KYC) protocol in place thereby helping the government to keep track of fraudulent activities. This is contrary to what is going on presently as it is a well known fact that paper money is hardly tracked in Nigeria which is why terrorists utilize this loophole to carryout nefarious activities like ransom taking because they know cash can be spent with no questions asked unlike when they accept ransom payment through bank transfer which can be easily tracked.

This loophole however does not exist with cryptocurrency as the possibilities of funds being untraced is unlikely due to the fact that the transactions can be associated with a client by utilizing a centralized exchange's KYC database.

I believe the government institutions need to bring in knowledgeable crypto forensic investigators and blockchain technology experts to help them get a more accurate and fair view of the cryptocurrency space in general.

Futhermore, there is need for officers of the EFCC and the police need to undergo specialized training that will help them better understand what cryptocurrency entails and how to better investigate crimes that utilize cryptocurrency. There are alot of ways people engage in cryptocurrency alot of people engage in trading, smart contract development e.t.c. Not all cryptocurrency users are not fraudsters only a minute few are. Therefore, it is necessary for the law enforcement agencies to take note of this.
Also, the Nigerian cryptocurrency community needs to engage more with the CBN and law enforcement agencies just as they have done with the Securities and Exchange commission (SEC) in Nigeria and inturn recording a very good amount of success with that organization.

It is my hope that in the future, the Nigerian institutions and law enforcement agencies will be more cryptocurrency friendly and open to cryptocurrency adoption in the future. Hopefully, we will get there. Let's keep pushing.

Author: Seun Seriki

Nice write up. I use Binance and Yellow card and can’t wait for the Government to make cryptocurrency more friendly.