India Announces Bill To Ban Cryptocurrencies

In this file photo taken on February 06, 2018 A picture taken on February 6, 2018 shows a visual representation of the digital crypto-currency Bitcoin, at the “Bitcoin Change” shop in the Israeli city of Tel Aviv. Photo by JACK GUEZ / AFP

 

India’s government will introduce a bill to ban private cryptocurrencies and create a framework for a central bank-backed digital money, parliament said in a shock announcement late Tuesday.

The proposed bill “seeks to prohibit all private cryptocurrencies in India”, the Lok Sabha said, and comes after Prime Minister Narendra Modi warned last week that Bitcoin presents a risk to younger generations and could “spoil our youth” if it ends up “in the wrong hands”.

It is the latest such move by a major emerging economy, after China declared all cryptocurrency transactions illegal in September.

READ ALSO: India’s Biggest-Ever IPO Paytm Slumps By 27% On Market Debut

India’s crypto market has boomed since the country’s Supreme Court overturned a previous ban in April last year, growing more than 600 percent over the past year according to research by Chainalysis.

Between 15 and 100 million people in Asia’s third-largest economy are estimated to own cryptocurrencies, with total holdings in the billions of dollars.

Their investments will now face an uncertain future.

India’s central bank announced in June that it is working to introduce its own digital currency by the end of the year, while warning it has “serious concerns” about private cryptocurrencies like Bitcoin, Ethereum and others.

The bill, to come before the new legislative session, will allow for some exceptions to promote cryptocurrency technology, according to parliament’s bulletin of upcoming business, but no further details about the proposed legislation were released.

The market price of Bitcoin appeared unaffected and was up 1.67 percent in Tuesday’s trade.

But the phrasing of the proposed bill sent alarm bells ringing among local traders and enthusiasts.

“The wording has created a panic,” Kashif Raza, founder of crypto-education platform Bitinning, said, adding that the industry expected the government to take a more favourable view after recent consultations with the industry.

“Obviously there will be a shutter-down on the industry,” he added. “The industry will die in its natural way. Intellectual capital will move away, investors will face losses.”

Under scrutiny

Cryptocurrencies have been under scrutiny by Indian regulators since first entering the local market in 2013.

A surge in fraudulent crypto transactions following the Modi government’s demonetisation of nearly all banknotes in 2016 led to the country’s central bank banning crypto transactions in April 2018.

The Supreme Court lifted the ban two years later and investments have surged in the time since.

Indians have been bombarded in recent months with advertisements for CoinSwitchKuber, CoinDCX and other home-grown crypto exchanges across television channels, online streaming services and social media.

These platforms spent more than 500 million rupees ($6.7 million) on advertising spots during the recently concluded T20 cricket World Cup, research by TAM Sports showed, with viewers subjected to an average of 51 cryptocurrency advertisements per match.

Analysts say regulation would be central to addressing security risks, with crypto exchanges increasingly targeted by cyber criminals as virtual currency prices soar.

Elon Musk Wants US Regulators To Let Cryptocurrency ‘Fly’

(File) Billionaire entrepreneur and founder of SpaceX Elon Musk speaks at the 68th International Astronautical Congress 2017 in Adelaide on September 29, 2017.  PETER PARKS / AFP

 

 

Tesla chief executive Elon Musk thinks United States regulators should take cryptocurrency out of their crosshairs, leaving it free to ‘fly’.

The colorful serial entrepreneur, an outspoken digital money fan, shared his view at a Code Conference in Beverly Hills on Tuesday, as governments around the world fret over cryptocurrency threatening their control of financial systems.

“I would say, do nothing,” Musk said when asked by interviewer Kara Swisher what US regulators should do about cryptocurrency.

“I would actually say, just let it fly.”

US Securities and Exchange Commission chair Gary Gensler said earlier at the conference there is potential for cryptocurrency to be considered a security, and platforms to be seen through the lens of those regulations.

China’s central bank last week said all financial transactions involving cryptocurrencies are illegal, sounding the death knell for the digital trade in the country after a crackdown on the volatile currencies.

“It is not possible to destroy crypto, but it is possible for governments to slow down its advancement,” Musk said during the on-stage interview.

The global values of cryptocurrencies, including Bitcoin, have fluctuated massively over the past year, in part due to Chinese regulations, which have sought to prevent speculation and money laundering.

“It would appear they don’t love cryptocurrency; it’s subtle but hinting in that direction,” Musk quipped when asked about the crackdown in China.

“I suppose cryptocurrency is fundamentally aimed at reducing the power of a centralised government, and they don’t like that.”

Part of China’s concern could also be over electricity shortage problems, as mining cryptocurrency uses massive amounts of power, Musk reasoned.

Tesla early this year announced it had bought $1.5 billion worth of Bitcoin, and dabbled briefly with letting people pay for its electric cars in the cryptocurrency.

“I wouldn’t say that I am some massive cryptocurrency expert,” Musk said.

“I think there is some value in cryptocurrency. I don’t think it is like the second coming of the messiah, which is what some people seem to think.”

AFP

Bitcoin In El Salvador: How Will It Work?

In this file photo taken on February 06, 2018 A picture taken on February 6, 2018 shows a visual representation of the digital crypto-currency Bitcoin, at the “Bitcoin Change” shop in the Israeli city of Tel Aviv. (Photo by JACK GUEZ / AFP)

 

El Salvador on Tuesday became the first country to use bitcoin as legal tender, alongside the US dollar. But how will it work?

A few pointers to President Nayib Bukele’s currency experiment:

What is cryptocurrency? 

Cryptocurrencies are digital currencies that can be used to pay for goods and services.

The first was bitcoin, created in 2009, which uses so-called blockchain technology to secure and record each transaction.

Cryptocurrencies, of which there are thousands currently, are not regulated by any central bank, and the price — often volatile — is determined by market factors.

Bitcoin started off valued at cents to the dollar, and is now trading at around $46,000 — down from an all-time high of more than $63,000 in April.

How does El Salvador’s ‘Chivo’ digital wallet work? 

Bitcoins are loaded onto digital wallets and accessed via a mobile app. In El Salvador, the wallet is called “Chivo,” which translates as “cool” in the local dialect.

To download the Chivo wallet, one needs a Salvadoran ID document.

Users can configure Chivo to make payments either in bitcoin or their dollar equivalent.

To draw or deposit cash (in dollars), the government has erected 200 Chivo automatic teller machines countrywide.

To pay for goods and services, both the buyer and seller must have the electronic app.

READ ALSO: Bitcoin Soars Close To $40,000, Attracts High-Profile Interest

Is it obligatory to use bitcoin in El Salvador? 

Under a law pushed by Bukele and passed within 24 hours by his parliamentary majority in June, “any economic agent must accept bitcoin as a form of payment when it is offered by the person who acquires a good or service.”

But if a vendor prefers to receive dollars as online payment, the Chivo user can make an on-the-spot conversion when paying via the app.

Consumers will not be under any obligation to switch to bitcoin, although those who do will receive a one-off incentive equivalent to $30 in their wallet from the government.

What can it be used for? 

The holder of a Chivo wallet can use it to pay for services, to buy and sell products, and to make transfers to bank accounts without paying commission fees, among other benefits.

According to the law, any good or service previously payable in dollars can now also be paid in bitcoin.

How is El Salvador financing it? 

The government has budgeted $203 million in public money to bolster its bitcoin plan, which it says will give more people access to banking services and shave millions off commission fees for crucial remittances sent home from abroad.

Of this amount, $150 million is to guarantee the “convertibility” of bitcoin into dollars, and $23.3 million for financing the rollout. Another $30 million was set aside for the $30 bonus for new users.

The government got the ball rolling by buying its first 400 bitcoins Monday, followed by another 150 on Tuesday, for a total value of $26 million.

Do Salvadorans support it? 

An opinion poll by the Central American University found that more than 80 percent of respondents were wary of the new currency, and 70 percent were opposed to making it legal tender.

Nearly two-thirds said they had no interest in downloading the Chivo wallet.

The government has not released figures on uptake.

Before Tuesday’s official launch, some 50,000 Salvadorans were using bitcoin, according to Bukele in June.

Many of them live in the coastal town of El Zonte, where hundreds of businesses and individuals use the currency thanks to a project by an anonymous bitcoin donor to help people who previously had hardly any bank access.

They now use bitcoin for everything, from paying utility bills to buying a can of soda, and until recently, El Zonte boasted El Salvador’s only bitcoin teller machine.

What are the risks?

Experts and regulators have highlighted concerns about the cryptocurrency’s notorious volatility, its potential impact on price inflation in a country with high poverty and unemployment, and the lack of protection for users.

The World Bank rejected a request from El Salvador for assistance in its bid to adopt bitcoin as a currency, citing “environmental and transparency shortcomings.”

Bitcoin and other cyber currencies are “mined” by solving complicated puzzles using powerful computers that consume enormous amounts of electricity — much of which is produced by coal plants.

Bitcoin is also criticized by regulators for its potential for illegal use — notably in laundering money from criminal activities and financing terrorism.

The IMF has also flagged concerns, saying El Salvador’s move “raises a number of macroeconomic, financial and legal issues that require careful analysis.”

“Crypto assets can pose significant risks, and effective regulatory measures are very important when dealing with them,” spokesman Gerry Rice said in June.

AFP

Record Cryptocurrency Heist Valued At $600m

In this file photo taken on January 26, 2020 a physical imitation of a Bitcoin is pictured in Dortmund, western Germany.  INA FASSBENDER / AFP

 

A firm specializing in transferring cryptocurrency said Tuesday that hackers cracked its security, making off with a record-setting haul potentially worth $600 million.

Poly Network put out a plea for the stolen Ethereum, BinanceChain and OxPolygon tokens to be shunned by traders running “wallets” for storing cryptocurrency.

“The amount of money you hacked is the biggest one in the defi history,” Poly Network said in a tweeted message to the thieves, using a reference to decentralized finance involving cryptocurrency.

“The money you stole are from tens of thousands of crypto community members.”

Poly Network threatened police involvement, but also offered the hackers the chance to “work out a solution.”

The US Department of Justice and FBI did not immediately respond to requests for comment.

“We are sorry to announce that #PolyNetwork was attacked” and assets transferred to hacker-controlled accounts, the company said in a series of tweets.

READ ALSO: Bitcoin Soars Close To $40,000, Attracts High-Profile Interest

In this file photo taken on February 06, 2018 A picture taken on February 6, 2018 shows a visual representation of the digital crypto-currency Bitcoin, at the “Bitcoin Change” shop in the Israeli city of Tel Aviv. (Photo by JACK GUEZ / AFP)

 

Poly Network posted online addresses used by the hackers, and called on “miners of affected blockchain and crypto exchanges to blacklist tokens” coming from them.

Poly Network did not reply to an AFP request for comment, but Twitter users weighed in with calculations valuing the hackers’ haul at some $600 million.

As of the end of April, cryptocurrency thefts, hacks and fraud so far this year totaled $432 million, according to an analysis by CipherTrace.

“While this number may appear to be small when compared to previous years, a deeper look reveals an alarming new trend — DeFi-related hacks now make up more than 60 percent of the total hack and theft volume,” CipherTrace said in a posted report.

That compares to 2019, when defi hacks were virtually non-existent, according to CipherTrace.

AFP

 

 

UK Bans Cryptocurrency Exchange Binance

A banner with the logo of bitcoin is seen during the crypto-currency conference Bitcoin 2021 Convention at the Mana Convention Center in Miami, Florida, on June 4, 2021.
Marco BELLO / AFP

 

The UK’s finance watchdog has banned major cryptocurrency exchange Binance from regulated trading in Britain, as the industry faces greater global scrutiny.

Binance Markets Limited, part of Binance Group, is “not permitted to undertake any regulated activity in the UK”, the Financial Conduct Authority (FCA) said in a statement published over the weekend.

The ban affects options and futures contracts related to bets on price movements of cryptocurrencies.

However purchases of cryptocurrency units, such as of bitcoin and dogecoin, can continue since they are not regarded as financial products and are therefore not regulated.

Binance Group tweeted that the FCA move would have “no direct impact”.

Founded in China four years ago, Binance is one of the world’s two biggest crypto exchanges along with Coinbase in the United States.

Cryptocurrencies have long sparked concern among central banks and regulators alike, because of their lack of oversight.

The FCA has meanwhile warned consumers once more not to be lured by promises of high returns.

Bitcoin traders shrugged off the weekend developments, sending the virtual unit up 5.47 percent to $33,981 in Monday deals.

The unit has however slumped in recent weeks after China launched a crackdown on the industry.

Bitcoin had hit a record near $65,000 in April on the back of runaway demand.

Laith Khalaf, financial analyst at stockbroker AJ Bell, said that tighter regulation was a consequence of this boom.

“Cryptocurrency is a victim of its own success because regulators across the globe are increasingly turning their beady eyes on crypto assets — and companies like Binance that offer crypto services to consumers.

“This isn’t a step change in regulation which is going to knock the crypto craze on the head, but it is part of a growing trend of regulatory intervention in crypto markets.”

 

AFP

Turkey Seeks Arrest Of Crypto Boss Over Huge Fraud, Detains Dozens

 This file photo taken on February 6, 2018, shows a visual representation of the digital crypto-currency Bitcoin, at the "Bitcoin Change" shop in the Israeli city of Tel Aviv.  JACK GUEZ / AFP
This file photo taken on February 6, 2018, shows a visual representation of the digital crypto-currency Bitcoin, at the “Bitcoin Change” shop in the Israeli city of Tel Aviv. JACK GUEZ / AFP

 

Turkey issued an international arrest warrant on Friday for the founder of a cryptocurrency exchange who fled with a reported $2 billion in investors’ assets, state media reported.

Police also detained 62 people in raids over their alleged links to Thodex, the company headed by the fugitive businessman Faruk Fatih Ozer.

He is being sought on charges of “fraud by using information systems, banks or credit institutions as a tool and founding a criminal organisation”, the Anadolu news agency reported.

Turkish security officials on Thursday released a photo of Ozer going through passport control at Istanbul airport on his way to an undisclosed location.

Security sources later confirmed that Ozer — said to be 27 years old — has been in Albania since Tuesday.

The justice ministry has started legal proceedings to seek his arrest and extradition from the Albanian capital Tirana, Anadolu reported.

Interior Minister Suleyman Soylu spoke by phone with his Albanian counterpart about the case, the agency added.

The Thodex exchange suspended trading after posting a mysterious message on Wednesday saying it needed five days to deal with an unspecified outside investment.

Media reports said the exchange shut down while holding at least $2 billion from 391,000 investors.

Freeze on bank accounts

The 62 suspects were apprehended in simultaneous raids carried out in eight cities including Turkey’s main hub Istanbul, Anadolu reported.

Police raided the company’s headquarters on the Asian side of Istanbul and seized computers and digital materials, press reports said.

Authorities also confiscated Ozer’s 31 million lira ($3.7 million) in banks, Soylu said.

He said the financial scale of the fraud remained unknown for now.

“We will see the ramifications in the coming days … God willing, he will be captured and returned to Turkey.”

Police have issued arrest warrants for 16 other people, Anadolu said, without elaborating. There was no immediate information about those being held.

A lawyer for the investors, Oguz Evren Kilic, said Friday that the investigation into Thodex “is deepening”.

“Hundreds of thousands of users cannot get access to their digital wallets. The situation will get more serious unless a concrete step is taken” by Thodex, he told AFP by phone.

Kilic said his clients have already lodged complaints at the prosecutor’s office in Istanbul and other cities.

In a message posted on the company’s official Twitter account on Thursday, Ozer slammed the “baseless allegations” against him.

He said he was abroad for meetings with foreign investors and would return home “in a few days and cooperate with judicial authorities so that the truth can come out”.

‘I’m begging you, help’

The number of complaints against Thodex has increased by more than 1,160 percent over the week to April 20 compared to the previous week, according to Turkish customer complaint website Sikayetvar.

One investor who reached Sikayetvar said: “I have been unemployed for a year. I trusted Thodex and invested everything I have… I can’t sleep or eat. I am begging you, please help.”

Another said: “Why is Thodex’s CEO silent? Why are they victimising people? Are you making fun of us?”

Growing numbers of Turks are turning to cryptocurrencies in a bid to shield their savings in the face of a sharp decline in the value of the Turkish lira and high inflation.

The Turkish crypto market remains unregulated despite growing scepticism from President Recep Tayyip Erdogan’s government about its safety.

Turkey’s central bank said last week it will ban the use of cryptocurrencies in payments for goods and services starting from April 30.

It warned that cryptocurrencies “entail significant risks” because the market is volatile and lacks oversight.

AFP

Cryptocurrency Market Now Worth $2trn

FILES) In this file photo taken on January 26, 2020 a physical imitation of a Bitcoin is pictured in Dortmund, western Germany. 
INA FASSBENDER / AFP

 

The cryptocurrency market has grown exponentially in 2021 and is now worth a staggering $2.0 trillion as it increasingly attracts interest from big names on Wall Street.

As digital currency exchange Coinbase prepares to list Wednesday in New York, AFP takes a look at a sector built from scratch just 12 years ago.

 Bitcoin

On October 31, 2008, in the wake of the financial crisis, one or more anonymous people, hidden behind the pseudonym Satoshi Nakamoto, published the founding white paper of bitcoin.

The goal was to create a means of payment, the security of which would not be overseen by a central bank or financial organisations, but instead regulated by software with rules almost impossible to alter.

While anybody can “mine” for new bitcoins, to do so requires giant data centres — leading to platforms such as Coinbase providing a way of trading in cryptocurrencies.

Banks and payment services such as Paypal allow transactions in certain digital currencies.

Almost 18.7 million bitcoins have been created since the first block of 50 in early 2009.

A limit of 21 million bitcoins has been set by Nakamoto.

An investment

Despite bitcoin’s volatility and limitations as a means of payment, it is being seen as a store of value to rival and even one day potentially surpass gold as a haven investment in the face of high inflation for example.

In Nigeria, where the naira currency has shed 50 percent of its value against the dollar in recent years, it is claimed that a third of inhabitants have used cryptocurrencies.

After bitcoin’s value crashed in 2018 it rebounded, and has smashed records since late last year — rocketing from around $12,000 in October to more than $62,000 on Tuesday.

Against this backdrop, central banks and market regulators warn about the volatility’s impact — especially on small investors who risk suffering big losses.

But it is clear that some individuals and companies have made huge gains from bitcoin, while major central banks are working on their own potential digital-currency projects.

Electric car giant Tesla has invested $1.5 billion in bitcoin and in March began accepting the currency as payment.

Tesla’s multi-billionaire chief executive Elon Musk has used social media to espouse the merits of cryptocurrencies, helping to lift interest and prices.

Other cryptocurrencies

Numerous cryptocurrencies seek to compete with, or complement, bitcoin.

Number two in the market is ethereum, which this week hit an all-time high above $2,000.

The cryptocurrency market as a whole is worth more than $2.0 trillion, according to specialist site Coinmarketcap, which lists more than 9,000 different cryptocurrencies.

Some are known as “stablecoins” as their value is tied to a traditional asset such as the dollar, helping to avoid the volatility shown by bitcoin.

Meanwhile, with bitcoin and other cryptocurrencies mined by solving puzzles using powerful computers that consume enormous amounts of electricity, environmental concerns cast a further shadow.

-AFP

Bitcoin Hits Record High Above $62,000

File photo of visual representation of the digital cryptocurrency Bitcoin, at the “Bitcoin Change” shop in the Israeli city of Tel Aviv. PHOTO: JACK GUEZ

 

Bitcoin hit a record high above $62,000 Tuesday as the cryptocurrency exchange Coinbase prepares to launch shares on Wall Street.

Bitcoin reached $62,377, a huge gain of 114 percent since the start of the year.

After crashing in 2018, the value of bitcoin rebounded and it has set records since late last year — rocketing from around $12,000 in October to more than $60,000 a month ago.

The arrival Wednesday of cryptocurrency exchange Coinbase on the Nasdaq is one of Wall Street’s most anticipated events of the year even though some question whether the cryptocurrency market is sustainable.

READ ALSO: SEC Warns Nigerians Against Investing In Unregistered Online Platforms

Estimates of Coinbase’s value vary depending on how it is calculated, but its capitalisation is expected to range from $70 to $100 billion.

That would make it the largest initial public offer (IPO) for a US company since Facebook in 2012.

Founded in 2012, the platform allows users to buy and sell about 50 cryptocurrencies.

The cryptocurrency market has grown exponentially in 2021 and is now worth a staggering $2.0 trillion as it increasingly attracts interest from big names on Wall Street.

While anybody can “mine” for new bitcoins, to do so requires giant data centres, which has led to platforms such as Coinbase providing a way of trading in cryptocurrencies.

Banks and payment services such as Paypal allow transactions in certain digital currencies.

Despite 12-year-old bitcoin’s volatility and limitations as a means of payment, it is seen as a store of value to rival and perhaps one day surpass gold as a haven investment in the face of high inflation for example.

Electric car giant Tesla has invested $1.5 billion in bitcoin and in March began accepting the currency as payment.

Tesla’s multi-billionaire chief executive Elon Musk has also used social media to espouse the merits of cryptocurrencies, helping to lift interest and prices.

AFP

You Can Now Buy A Tesla With Bitcoin – Elon Musk

In this file photo Tesla CEO Elon Musk talks to media as he arrives to visit the construction site of the future US electric car giant Tesla in Gruenheide near Berlin on September 3, 2020. Odd ANDERSEN / AFP
In this file photo, Tesla CEO Elon Musk talks to the media as he arrives to visit the construction site of the US electric car giant Tesla in Gruenheide near Berlin on September 3, 2020. PHOTO: Odd ANDERSEN / AFP

 

Elon Musk, the owner of the electric car maker, Tesla, on Thursday announced that a Tesla vehicle can now be bought with the world’s most popular cryptocurrency, Bitcoin.

Mr Musk disclosed this in a series of tweets posted on his official Twitter handle on Wednesday.

“You can now buy a Tesla with Bitcoin,” he tweeted.

 

 

The business magnate said further that, “Tesla is using only internal & open source software & operates Bitcoin nodes directly.

“Bitcoin paid to Tesla will be retained as Bitcoin, not converted to fiat currency.
“Pay by Bitcoin capability available outside the US later this year,” he said.

This tweet by the business magnet has sent the price of the world’s most popular cryptocurrency soaring.

Last month, the electric carmaker Tesla invested $1.5 billion in the virtual unit, while Twitter chief Jack Dorsey and rap mogul Jay-Z said they are creating a fund aimed at making Bitcoin “the internet’s currency”.

Others jumping on the bandwagon include Wall Street player BNY Mellon, investment fund giant BlackRock, and credit card titan Mastercard.

Bitcoin, which was launched back in 2009, hit the headlines in 2017 after soaring from less than $1,000 in January to almost $20,000 in December of the same year.

 

Musk The ‘Tecknoking’

Elon Musk according to Forbes is working to revolutionise transportation both on Earth, through Tesla – and in space, via rocket producer SpaceX.

On Tuesday, last week, Tesla crowned him with a new title: Technoking.

The company’s chief financial officer, Zach Kirkhorn was also given the title “Master of Coin,” Tesla said Monday in a filing with the Securities and Exchange Commission (SEC).

Norm-shattering entrepreneur Musk, who has more than 41 million followers on Twitter and a fortune now estimated at more than $180 billion, has had frequent conflicts with regulators at the SEC and is not shy about tweaking them on social media.

The entrepreneur also recently waded to the new online fascination with digital art forms known as “NFTs,” virtual objects that can be sold with a certificate of authenticity proving that they are, in theory, non-piratable thanks to the blockchain technology that was popularized by cryptocurrencies such as Bitcoin.

Musk also announced on his Twitter account that he would be selling a video clip of techno music about NFTs, or Non-Fungible Tokens, as an NFT.

The cryptocurrency website Cointelegraph said bidding on the NFT had risen to $100,000 in the first hour after Musk made the announcement, even though Musk has not actually put the song on the market yet.

Use Of Cryptocurrency Illegal In Nigeria, Says CBN

A file photo of Governor of the Central Bank of Nigeria, Godwin Emefiele
A file photo of Governor of the Central Bank of Nigeria, Godwin Emefiele

 

The Central Bank of Nigeria on Sunday said the use of cryptocurrencies in Nigeria contravenes existing laws.

The apex bank was responding to public criticism of its Friday notice warning Deposit Money Banks (DMBs) to desist from transacting cryptocurrencies and dealing with entities who do same.

According to the CBN, cryptocurrencies are “issued by unknown and unregulated entities” and are increasingly being used to conduct ” many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion.”

READ ALSO: [Cryptocurrency] What’s Bitcoin Really Worth?

The CBN said its position on cryptocurrencies will have no negative impact on the development of financial technology in Nigeria.

“To the contrary, the Nigerian payment system has evolved significantly over the last decade, leapfrogging many of its counterparts in emerging, frontier and advanced economies propelled by reforms driven by the CBN,” the bank said.

It added that it will “continue to do all within its regulatory powers to educate Nigerians to desist from its use and protect our financial system from activities of fraudsters and speculators.”

Read the CBN’s full statement:

CBN Press Release on Crypto-currency

The attention of the Central Bank of Nigeria (CBN) has been drawn to various comments and reactions following our recent reminder to Deposit Money Banks (DMBs) to desist from transacting in / and with entities dealing in cryptocurrencies. Most of these reactions reveal that there appears to be a need to provide further  justifications about our position, especially to the general public.

For those who are not conversant with the universe of cryptocurrencies, it is important to state that Cryptocurrencies are digital or virtual currencies issued by largely anonymous entities and secured by cryptography. Cryptography is a method of encrypting and hiding codes that prevent oversight, accountability, and regulation. While there are a number of cryptocurrencies now in circulation, Bitcoin was the first to be introduced in 2009, and now accounts for about 68 percent of all cryptocurrencies.

As regards our recent policy pronouncement,  it is important to clarify that the CBN circular of February 5, 2021 did not place any new restrictions on cryptocurrencies, given that all banks in the country had earlier been forbidden, through CBN’s circular dated January 12, 2017, not to use, hold, trade and/or transact in cryptocurrencies . Indeed, this position was reiterated in another CBN Press Release dated February 27, 2018.

It is also important to note that the CBN’s position on cryptocurrencies  is not an outlier as many countries, central banks, international financial institutions, and distinguished investors and economists have also warned against its use. They have all made similar pronouncements based of the significant risks that transacting in cryptocurrencies portend- risk of loss of investments, money laundering, terrorism financing, illicit fund flows and criminal activities. China, Canada, Taiwan, Indonesia, Algeria, Egypt, Morocco, Bolivia, Kyrgyzstan, Ecuador, Saudi Arabia, Jordan, Iran, Bangladesh, Nepal and Cambodia have all placed certain level of restrictions on financial institutions facilitating cryptocurrency transactions.
In China, for example, cryptocurrencies are completely banned and all exchanges closed as well. Banks and other financial institutions are not allowed by law to transact or deal with cryptocurrencies. China’s Central Bank, called the Peoples Bank of China (PBoC) has provided several directives ruling out the use of these currencies. The PBOC views cryptocurrencies as illegal because they are not issued by any recognized monetary institution and do not hold any legal status that can make them equivalent to money. Hence banks and all stakeholders are strongly advised against their use as a currency.
Even famed investor Warren Buffett has called cryptocurrencies “rat poison squared,” a “mirage,” and a “gambling device.” Mr. Buffett believes it is a “gambling device” given that they are mostly valuable because the person buying it does so, not as a means of payment; but in the hope they can sell it for even more than what they paid at some point.

During an online forum hosted by the Davos-based World Economic Forum few weeks ago, Andrew Bailey, the Governor of the Bank of England, highlighted the extreme price volatility of cryptocurrencies as one of the biggest flaws and explained that this flaw makes it impossible for them to be used as a lasting means of payment.

“Have we landed on what I would call the design, governance and arrangements for what I might call a lasting digital currency? No, I don’t think we’re there yet, honestly. I don’t think cryptocurrencies as originally formulated are it,” he said.

It is not surprising he would take that position because, Bitcoin, the best-known cryptocurrency, hit a record high of $42,000 per unit on January 8, 2021, and sank as low as $28,800 about two weeks later. This is far greater volatility than is found with normal currencies.

Let us now turn to some of the justifications for CBN’s recent policy reminder. A perfunctory reflection on the definition of cryptocurrencies can already reveal several problems.

First, in light of the fact that they are issued by unregulated and unlicensed entities, their use in Nigeria goes against the key mandates of the CBN, as enshrined in the CBN Act (2007), as the issuer of legal tender in Nigeria. In effect, the use of cryptocurrencies in Nigeria are a direct contravention of existing law. It is also important to highlight that there is a critical difference between a Central Bank issued Digital Currency and cryptocurrencies. As the names imply, while Central Banks can issue Digital Currencies, cryptocurrencies are issued by unknown and unregulated entities.

Second, the very name and nature of “cryptocurrencies” suggests that its patrons and users value anonymity, obscurity, and concealment. The question that one may need to ask therefore is, why any entity  would disguise its transactions if they were legal. It is on the basis of this opacity that cryptocurrencies have become well-suited for conducting many illegal activities including money laundering, terrorism financing, purchase of small arms and light weapons, and tax evasion. Indeed, many banks and investors who place a high value on reputation have been turned off from cryptocurrencies because of the damaging effects of the widespread use of cryptocurrencies for illegal activities. In fact, the role of cryptocurrencies in the purchase of hard and illegal drugs on the darknet website called “Silk Road” is well known. They have also been recent reports that cryptocurrencies have been used to finance terror plots, further damaging its image as a legitimate means of exchange.

More also, repeated and recent evidence now suggests that some cryptocurrencies have become more widely used as speculative assets rather than as means of payment, thus explaining the significant volatility and variability in their prices. Because the total number of Bitcoins that would ever be issued is fixed (only 21 million will ever be created), new issuances are predetermined at a gradually decelerating pace. This limited supply has created a perverse incentive that encourages users to stockpile them in the hope that their prices rise. Unfortunately, with a conglomeration of desperate, disparate, and unregulated actors comes unprecedented price volatility that have threatened many sophisticated financial systems. In fact, the price of ether, one of the largest cryptocurrencies in the world, fell from US$320 to US$0.10 in June 2017. The price of Bitcoins has also suffered similar volatilities.

Given that unlike Fiat money, which is accompanied by  full faith and comfort of a country or Central Bank, cryptocurrencies do not have any intrinsic value and do not generate returns by themselves. When one buys a stock, say of a conglomerate in the Nigeria Stock Exchange, its price reflects the activity and production of that conglomerate and the value people place on their goods and/or services. This price may rise as the conglomerate produces better goods/services and probably gains greater market share. The reverse would be true if the conglomerate does not innovate to improve the quality of its goods/services. In other words, the price of that stock reflects market fundamentals. In contrast, , cryptocurrencies do not have fundamentals and would never have fundamentals. Investors only buy in the hope that its use and acceptability will rise, thereby pushing up its demand and price.         But since new versions of cryptocurrencies come on stream with new mathematical models, an infinite supply may someday crash the price to zero.

At this juncture, the CBN would like to assert that our actions are not in any way, shape or form inimical to the development of FinTech or a technology-driven payment system. To the contrary, the Nigerian payment system has evolved significantly over the last decade, leapfrogging many of its counterparts in emerging, frontier and advanced economies propelled by reforms driven by the CBN. This is evident from the variety of participants, products, channels, cutting-edge technology in the payments system. It is also validated by the astronomical growth of volume/value of transactions and the fact that Nigeria is an investment destination of choice for international financial technology companies because of CBN’s policies that have created an enabling investment environment in the payments system.

These developments in the payments and settlements space has helped to grow the financial system, improving financial inclusion, the quality and convenience of financial services and has also created millions of direct and indirect jobs for teeming youth population.

The innovations in Nigeria’s payment system were catalyzed by regulatory reforms driven by the CBN which entailed the issuance of a raft of guidelines and regulations on Operations of Electronic Payments Channels in Nigeria; Transaction Switching; Card Issuance and Usage, Licensing of payment service providers; Mobile Money Services, Electronic Payments of Salaries, Pensions, Suppliers and Taxes, Licensing Super Agents in Nigeria; and use of USSD for Financial Services in Nigeria, Super Agents and Agent Banking Operations  and Payment Service Banks to mention a few.

The robust regulatory framework put in place by the Bank opened up the payment system to innovation with several new players across in the following licensing categories- Payment Terminal Service Providers (PTSPs), Payment Solution Service Providers (PSSPs), Mobile Money Operators (MMOs), Payment Terminal Application Developers (PTSAs), Switches, Super Agents,  Agents and Payment Service Banks (PSBs)    This has created both direct and indirect jobs for Nigeria’s youth population.

Several other initiatives are being implemented to further support FinTech development and creation of jobs. These include regulatory sandbox and open banking principles that the Bank recently implemented.

The recent regulatory directive became necessary to protect the financial system and the generality of Nigerians (including the youth population) from the risks inherent in crypto assets transactions, which have escalated in recent times, with dire consequences for the integrity of the financial system and financial stability. Due to the fact that cryptocurrencies are largely speculative, anonymous and untraceable they are increasingly being used for money laundering, terrorism financing and other criminal activities. Small retail and unsophisticated investors also face high probability of loss due to the high volatility of the investments in recent times.

In light of these realities and analyses, the CBN has no comfort in cryptocurrencies at this time and will continue to do all within its regulatory powers to educate Nigerians to desist from its use and protect our financial system from activities of fraudsters and speculators.

Osita Nwasinobi
Acting Director, Corporate Communications

$500m Worth Of Bitcoin Traded In Nigeria In Last Five Years – Moghalu

 

Former presidential candidate, Kingsley Moghalu, has said that $500 million worth of Bitcoin has been traded in Nigeria within the last five years.

Moghalu who was once the Head of Directorate of the Central Bank of Nigeria, (a unit which he says is in charge of the financial systems), disclosed these figures while reacting to the recent CBN policy which directed all banks to close accounts that transact in cryptocurrency.

He faulted the move of the apex bank, saying that regardless of the risks involved in trading in cryptocurrencies, he would not recommend that it be banned outrightly.

“A lot of the activities in the world are going digital and I would not recommend banning it (cryptocurrencies) outright,” Mr Moghalu said in an interview on Channels Television’s Sunday Politics.

“$500 million worth of Bitcoin has been traded in Nigeria within the last five years and Nigeria is one of the top 10 countries in the use of cryptocurrencies in the world today”.

Read Also: Cryptocurrency: What’s Bitcoin Really Worth?

He further explained that it is becoming a real factor in the country’s investment ecosystem, as well as a livelihood for many Nigerians.

The Central Bank of Nigeria on Friday, ordered all banks to close accounts of anyone who transacts in cryptocurrency.

The order was contained in a circular to banks and other financial institutions, signed by the Director of Banking Supervision, Bello Hassan, and was expected to take effect immediately.

According to the CBN, dealing in cryptocurrency or facilitating payments for cryptocurrency exchanges is prohibited.

However, Mr Moghalu faulted the directive and echoed the sentiments of many other Nigerians, noting that the move is seen as though the government is always taking actions aimed at taking away opportunities from Nigerians especially in a depressed economy.

He believes that any investment has risks and if he was in a position to make a decision, it would be to balance the risks as against the current realities of the country.

According to the former presidential candidate, regular currencies depreciate in value as against cryptocurrencies such as the BTC but many Policies from the bank in the past few years have not been favourable.

“The Nigerian Government should try to make the investment climate far more friendly and efficient than it is now.

“It is unfriendly, that’s why the foreign investment is declining,” he said.

Cryptocurrency: What’s Bitcoin Really Worth?

This photograph taken on December 17, 2020 shows a physical imitation of a Bitcoin at a cryptocurrency “Bitcoin Change” shop, near Grand Bazaar, in Istanbul. Leading virtual currency bitcoin on 16 December traded above $20,000 for the first time following a sustained run higher in recent weeks.

 

 

After the latest wild ride took the poster child of cryptocurrencies above $40,000 before a stomach-churning plunge, the million-dollar question won’t go away: how much is bitcoin actually worth?

The virtual currency barrelled to new highs to rise more than 400 percent over the past year, before promptly sliding some 20 percent and then settling around $36,000.

When it started life in 2009 as open-source software, bitcoin was essentially worth zero — though within a year it had reached the heady heights of eight cents.

At today’s market rates, bloated by a surge in institutional demand, the digital unit’s market capitalisation is worth some $670 billion with myriad other crypto coins such as ethereum lifting the sector nominally close to the trillion mark.

Although that’s small potatoes compared to the $68 trillion or so swilling around world stock markets, it is nonetheless the sort of financial territory staked out by Wall Street tech royalty such as Google, Apple or Tesla.

One tech site, AssetDash.com, notes that bitcoin is currently worth around as much as Facebook and a little more than Chinese e-retail giant Alibaba.

Curse of the forgotten password

Although deep-pocketed investors have recently become enthusiasts, crypto was in its early days the preserve of geeky amateur investors.

It is the latter who have mainly suffered as an estimated four million of the roughly 19 million bitcoin units currently in circulation have been lost.

“Lost” does not mean the coins have fallen down the back of the sofa or through a hole in a trouser pocket: they have been electronically zapped from the record, often because their owner has forgotten a password to coins hoarded on a USB stick.

One US developer mislaid his password after storing 7,002 bitcoins on one such flash drive, forcing him to wave goodbye, on paper (or rather, the trading screen), to around $280 million.

This week, Welshman James Howells desperately offered his local authority a quarter of his fortune to dig up a landfill site where he believes a hard drive he accidentally tossed away — and which has since soared in value to around $270 million — is buried. The council refused, citing the cost and logistical restrictions.

According to analysts at JP Morgan, bitcoin may be highly volatile but could go as high as $146,000 per unit, putting it in competition with gold as an asset class in terms of private sector investment.

That volatility, as well as the unregulated and decentralised nature of the bitcoin beast, are key reasons why many seasoned financial observers are scared off — as well as the risk of “losing” their stash.

“Most of the lost bitcoins were acquired in the early days,” said Philip Gradwell, economist with Chainalysis.

Gradwell said that around one in five bitcoins in circulation today have not budged from their location in five years — since days when the unit was worth not much more than $100.

“One or two million of those belong to Satoshi himself,” added Gradwell, referring to the creator of the coin, whose identity remains unknown.

He added that the bulk of investors are not day-to-day traders, but people making a long-term punt — and he estimates that the spectacular price boom of recent weeks has involved only around five millions units.

Patrick Heusser, head of trading at Swiss trader Crypto Broker, said that following the trading volumes of a variety of cryptocurrencies, rather than just bitcoin, would give a better idea of how the market is faring.

“Ethereum has a lot of activity on the chain, but on the litecoin side there is almost nothing going on,” said Heusser, with the former valued at some $138 billion currently, and the latter at $10 billion.

Heusser suggested the rises have been largely a bitcoin slipstream effect, and he cautioned against drawing parallels with gold.

“To be honest I don’t believe that it is a very powerful or insightful metric inside what’s going on in the crypto market,” Heusser concluded.

After years of experience on traditional currency markets, he judged that it was early days for the crypto equivalent.

“We’re still a small fish,” he said.