Cryptocurrency: “Thoughtful and knowledge-based regulation is the answer, not prohibition, Osinbajo advises CBN

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Nigeria’s Vice President, Yemi Osinbajo on Friday advised the Central Bank of Nigeria to think outside the box and apply knowledge-driven regulations instead of an outright ban on cryptocurrency transactions in the country.

The Vice President’s position is coming on the heels of the blanket ban slammed on cryptocurrencies in the country by the CBN.

Speaking at a CBN Bankers’ Forum on Friday, VP Osinbajo stated that sooner than later blockchain technology generally, and cryptocurrencies, in particular, will challenge traditional banking, including reserve banking, in ways that cannot be imagined.

He further stated that decentralized finance, using smart contracts to create financial instruments, in place of central financial intermediaries such as banks or brokerages are set to challenge traditional finance.

He, therefore, urged the CBN to prepare for that seismic shift and figure how to regulate the system rather than try to prohibit it.

“There is need for regulation and not prohibition of Cryptocurrency. On the very topical issue of blockchain technology, digital assets, and cryptocurrencies let me say two things.

“First is that there is no question that blockchain technology generally and cryptocurrencies, in particular, will in the coming years challenge traditional banking, including reserve banking, in ways that we cannot yet imagine so we need to be prepared for that seismic shift.

“And it may come sooner than later. Already remittance systems are being challenged. Blockchain technology will provide far cheaper options for the kind of fees being paid today for cross-border transfers.

“I am sure you are all aware of the challenge that the traditional SWIFT system is facing from new systems like Ripple which is based on the blockchain distributed ledger technology with its own crypto tokens. There are, of course, a whole range of digital assets spawned daily from blockchain technology.

“Decentralized finance, using smart contracts to create financial instruments, in place of central financial intermediaries such as banks or brokerages are set to challenge traditional finance.

“The likes of Nexo finance offer instant loans using cryptocurrency as collateral. Some reserve banks are investigating issuing their own digital currencies. Clearly, the future of money and finance, especially for traditional banking, must be as exciting as it is frightening.

“But as we have seen in many other sectors disruption makes room for efficiency and progress.

“Secondly, I fully appreciate the strong position of the CBN, SEC, and some of the anti-corruption agencies on the possible abuses of cryptocurrencies and their other well-articulated concerns. but I believe that their position should be the subject of further reflection.

“There is a role for regulation here. And it is in the place of both our monetary authorities and SEC to provide a robust regulatory regime that addresses these serious concerns without killing the goose that might lay the golden eggs.

“So, it should be thoughtful and knowledge-based regulation, not prohibition. The point I am making is that some of the exciting developments, we see the call for prudence & care in adopting them, but we must act with knowledge and not fear,” Osinbajo said.

Recall the CBN on Feb. 5 prohibited the trade of cryptocurrency and facilitating payment of cryptocurrencies in banks and other financial institutions.

Speaking at a joint Senate Committee on Banking, Insurance and Other Financial Institutions, ICT and Cybercrimes, and Capital Market, CBN Governor, Mr Godwin Emefiele said the CBN acted in the nation’s best interest.

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