Nigeria’s central bank continues to express its displeasure for flagship cryptocurrency, Bitcoin. In the latest announcement, the principal bank touted the digital Naira- the proposed central bank digital currency (CBDC) poised for launch by next month- above Bitcoin, noting that it was a better alternative to the country’s banking and financial framework.
While speaking at an event, CBN’s deputy governor of operations, Folashodun Shonubi revealed that the principal bank favored the proposed CBDC above decentralized currencies like Bitcoin. The deputy governor did not stop there; he further stated that the digital Naira stood a better chance of providing value to the country’s economy.
CBN Says Digital Naira to Help Banks Comply with Financial Regulations
According to the deputy governor, a digital Naira means that Nigeria’s banking infrastructure will easily comply with existing provisions against money laundering, while protecting consumers and preserving the security and stability of the country’s payment framework. Stressing further, Shonubi said the CBDC is more likely to align with the status quo in the banking framework.
Citing the benefits for banks in developing countries, he added that the digital Naira will provide them with more liquidity, assist in the smooth operation of the country’s remittance activities and address the underlying issue of exorbitant remittance costs as the world recovers in the post-COVID era. Banks must acknowledge the risks and try to reduce them, he concluded.
CBN Governor Says Cryptocurrencies Contribute to Economic Woes
The distrust of the Central Bank of Nigeria in cryptocurrencies dates back to a report in October 2020 where the bank’s overall head, governor Godwin Emefiele argued that crypto assets were killing the country’s financial infrastructure and was responsible for the slow influx of forex remittance.
The slow forex remittance is one of the fallouts of the increasing preference for cryptocurrencies by Nigerians in the Diaspora, as they try to remit money to their families and friends residing in the country.
The Central Bank of Nigeria followed the October report with a ban on crypto trading in March this year. According to a circular that was issued, CBN directed all commercial banks within the country to halt the banking services they provided to large-scale over-the-counter (OTC) traders and crypto exchanges.
While the decision was met with mixed reactions, the majority of which were from critics, the CBN stuck to its guns until it announced a reversal later in April. At the time, crypto enthusiasts in Nigeria had resorted to alternatives including peer-to-peer trading.
Now that the CBN is parading the digital Naira above Bitcoin and other cryptocurrencies, it has been argued how it hopes to regain the trust of Nigerians for the CBDC as the former have resorted to fiat dollar and cryptocurrencies to hedge against inflation and other economic challenges. The coming months are promising as to the success of Nigeria’s digital Naira.