NIGERIA government has banned financial institutions in the country from trading in virtual currencies, such as Bitcoin, Swisscoin and OneCoin, a move analysts say was a restrained first step towards regulating the digital currency that has exploded in popularity in Nigeria’s online trading transactions.
A statement by the central bank said that, while the computer-generated currency does not yet pose a threat to Nigeria’s financial system, it carries risks. It did not, however, curtail the use of bitcoin by individuals but warned on their investment safety.
Recently the Nigeria stock exchange has stressed the risks and possibilities of investors losing their money to such investments being promoted by these companies, including fraudulent pyramid schemes.
This ban comes against the backdrop on the return of Nigeria’s leading Ponzi scheme, MMM Nigeria, upon resumption; the scheme introduced the use of bitcoins as part of its payment options, citing bitcoin’s steady growth in value as a reason for participants to adopt the currency.
In recent months, bitcoin.org have been running campaign that bitcoin value relative to the dollar skyrocket some 800 percent in the past two months as speculators have piled into the currency. While there is no official data available, bitcoin market operators say Nigeria nationals are the second largest participants in the Africa Market behind South Africa.
A statement on the website of the Central Bank of Nigeria said that the government would act to prevent money laundering risks from bitcoin, which is not backed by government or central bank.
“Bitcoins, which are anonymous, untraceable, and can be carried on memory sticks or transmitted electronically, because they represent a potential hole in the country’s capital controls.”
Similarly, SEC advised the public to exercise extreme caution with regard to digital currencies as a vehicle of investments.
“The public should also be aware that any investment opportunities promoted by these persons, companies or entities are likely to be of a risky nature with a high risk of loss of money, while others may be outright fraudulent pyramid schemes,” the regulatory body noted.
SEC warned that, given that these instruments and the persons, companies or entities that promote them have neither been authorized, nor any guidelines/regulations developed for them by any of the regulatory authorities in Nigeria, there is no protection available to users or investors in these virtual currencies from financial losses if the virtual currencies fail or the companies promoting them go out of business.