MMM: Why the Central Bank of Nigeria warns against Bitcoin

Over the years, BITCOIN, the biggest cryptocurrency by value and market capitalization has enjoyed increasing acceptability. Retail stores, brokers, online market places began to accept BITCOIN as a mean of exchange. This meant more demand for BITCOIN which caused its price to soar. In China, BITCOIN was even traded as a safe haven asset as Chinese investors sought to hedge against their devalued currency. However, recently many regulatory bodies, including the China Central Bank issued a warning to major BITCOIN exchanges. In this article let's take a look at why the Central Bank of Nigeria warns against Bitcoin.

MMM: Why the Central Bank of Nigeria warns against Bitcoin

25 January, AtoZForex – A major reason why the Nigeria apex bank warned against BITCOIN and other cryptocurrencies is because of the moribund MMM scheme throughout the last year. Hence the reason why the Central Bank of Nigeria (CBN) issued warnings against the MMM scheme. The government even went to the extent of trying to block bank accounts of any of its members.

This however, yielded little results as the members began using BITCOIN as a means of exchange. With the near impossible task of tracking BITCOIN users, the scheme flourished not only in Nigeria, but also at a global level. When the scheme crashed in December, the Central Bank issued another MMM warning.

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Rise of Nigeria Internet Users

According to Internet Live Stats in 2016 the total number of Nigerian internet users surged to 86,219,965.

The following is the Nigerian Internet users statistics for 2016:

  • Share of Nigeria Population: 46.1 % (penetration)
  • Total Population : 186,987,563
  • Share of World Internet Users: 2.5 %
  • Internet Users in the World: 3,424,971,237

Nigerians looking for alternative safe heavens as the number of internet users rose, and CBN's monetary policy put the Naira heads down. As a result many of the opportunity takers flooded the Nigerian Bitcoin market as well. As a result, we have seen premiums in blackmarket Nigerian Bitcoin exchanges rising as much as $500.

Nigeria is not the only country paying such high price for Bitcoin, though. In Asia, India sees a similar trend, ever since the government made most of the cash supply useless. However, Indian Bitcoin premium is a lot lower, sitting at “just” 10-20% over the global average.

Here comes the CBN Bitcoin warning

Now, here comes the CBN Bitcoin warning. In a statement, CBN said virtual currencies are largely used in terrorism financing and money laundering, considering the anonymity of virtual transactions.

The Statement read: 

“Ensure that you do not use, hold, trade and/or transact in any way in virtual currencies. Ensure that existing customers that are virtual currency exchanges have effective capital controls that enable them to comply with customer identification, verification and transfer, monitoring requirements..... Any suspicious transactions by these customers should immediately be reported to the Nigerian Finance Intelligence Unit (NFIU)."

Interestingly, a few weeks ago, the CBN set up a committee to look at the possibility of regulating BITCOIN. Thus, a member of the committee said it was as a result of banks in Europe that had accepted BITCOINS as a means of exchange. With this new development however, exchanges and operators of BITCOIN will have to be on guard.

What is your thoughts on the Central Bank of Nigeria warning against BITCOIN? Share your view in the comments section below.

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