Nigeria’s resident representative of the lender says cryptocurrency is giving central banks globally headache.
The International Monetary Fund (IMF) resident representative in Nigeria, Ari Aisen, has said the use of cryptocurrencies is a major concern to central banks in most countries not only in Nigeria alone.
The IMF official made this remark on Wednesday during a virtual briefing on the recently published 2020 Article IV IMF Staff Report for Nigeria.
He said central banks in most countries are greatly worried about the kind of activities cryptocurrencies are used to promote and how best such can be monitored.
Mr Aisen also stated that some cryptocurrency transactions could be used for money laundering and drug trafficking.
This aligns with the Central Bank of Nigeria’s reasons for ordering the closure of all cryptocurrency related-accounts in the country.
The apex bank had on February 5 ordered Nigerian banks to close all cryptocurrency-related accounts. It also barred financial institutions from facilitating cryptocurrency payments in the country.
In another statement issued afterwards, the CBN explained why it banned cryptocurrency-related transactions in the country, claiming the digital currency is used for money laundering and terrorism.
The ban sparked controversies with fears that it might affect fintechs, and its rising potentials to the Nigerian economy might be lost because Nigeria is the world’s second-biggest user of virtual currencies like bitcoins.
Mr Aisen said many central banks around the world have taken similar policy decisions as the CBN.
“The issue with some of the cryptocurrencies is that perhaps some care should be taken about their activities. The use of cryptocurrencies is a concern,” he said.
The official said that is why some central banks, not only in Nigeria, have these concerns about what kind of the activities these crypto currencies are put into and how best to monitor those activities.
“Some of them may be illegal activities and may be related to money laundering, even drugs or other illegal things. It is natural that the monetary authorities will be concerned about how best to supervise and increase their oversight regarding the use of crypto currencies,” he said.
Mr Aisen said the CBN is thinking closely about its trade-offs and is trying to design the best policy in the interest of the payment system and the sustainability of the financial sector.
The IMF official called for the “unification of foreign exchange rates,” so as to make the management of foreign exchanges (forex) more transparent.
Speaking about forex scarcity, Mr Aisen explained that “there has been some level of scarcity of foreign exchange out there and it would be useful to unify rates to allow it fluctuate and to make forex more accessible to those who needed them”.
However, he stated that the Nigeria’s Debt or Gross Domestic Product (GDP) ratio has not reached a level of overt concern.
However, he urged the government to ensure that debt and GDP ratios are not allowed to reach a level that would make it unsustainable.
“It is important to manage borrowed funds properly for the economic benefits of the nation,” he said.