Nigeria may be heading towards introducing the use of virtual currencies for transactions as indications emerged Wednesday that plans were already mapped out to lay a solid foundation for a required regulatory climate that would guide its operations in the country.
Virtual currency is a type of unregulated, digital money, issued and usually controlled by its developers, used and accepted among the members of a specific virtual community.
As a digital representation of value, virtual currency is digitally traded and functions as a medium, a unit of account, and a share of value, but does not, however have a legal tender status when given to a creditor as a valid and legal offer of payment in any jurisdiction.
Joseph Nnanna, deputy governor, Financial System Stability, Central Bank of Nigeria (CBN), disclosed this while speaking at the second Anti-Money Laundering/Combating the Financing of Terrorism stakeholders’ consultative workshop in Abuja.
Nnanna said that increased interest in/and use of virtual currencies for both payment transactions and investment purposes, the volatility in the market for virtual currencies and the need to protect market participants against unauthorised access to electronic systems and accounts, were some reasons why virtual currency exchanges should be subjected to some form of regulation.
In his speech, Nnanna noted that although the use of virtual currencies for payment transactions and speculative investments was rapidly expanding globally, it was also not issued or guaranteed by any jurisdiction.
The workshop titled, “Money Laundering/Terrorism Financing (ML/TF) Risk from Virtual Currency and Non-Profit Organisations, was organised by chief compliance officers of banks in Nigeria and DataPro Limited.
Experts say that virtual currencies, especially convertible digital currencies like the Bitcoin, have thrown up issues for consideration, especially as they are now regarded as the wave of the further payment system and also due to the vulnerability of this system to be abused by criminals who could use it to move or store illicit funds.
“The development has made regulations around the world to grapple with how best to regulate such currencies for the protection of the customers and investors, to maintain the stability and satiety of the financial system, and deter the use of virtual currency systems in money laundering and terrorist financing,” Nnanna stated, as he expected that the workshop, “will further assist in laying a solid foundation for the much needed regulatory climate on the operations of virtual currency in Nigeria.”
The deputy governor also observed that a major focus of public debate regarding the use of virtual currency is currently on the protection of consumers.
This, according to him is because the traditional payment systems afford consumers protection against a variety of risks, while virtual currencies, on the other hand have the potential to expand consumer choice and spur new technological development and investment.
He further raised the concerns that to this extent, virtual currencies are subject to limited regulation due to ecosystem of its structural aspects and the protection of innocent consumers and players is currently absent.
A further challenge comes as a result of its ‘border less nature’, given the fact that its payment products and services can be carried out without a base in any particular jurisdiction.
The Financial Action Task Force (FATF), in addition to recognising financial innovation, also fears that virtual currency payment products and services present money laundering, terrorist financing and other crime risks that must be identified and mitigated. As a result, the body, in June this year, issued Guidance on virtual currency payment products and services, among some other risk mitigating measures.
In a welcome address, co-chair of the Association of Certified Anti-Money Laundering Specialists (ACAMS) noted that although the use of special currencies is yet to become prevalent in Nigeria, its growing popularity should call for attention and action of anyone who desires a crime-free financial and payment system.