Vice President Yemi Osinbajo has called on the Central Bank of Nigeria (CBN) to regulate rather than place a ban on cryptocurrency operations in the country.
He said this on Friday at the CBN Banker’s Forum while reacting to the ban of the trade and payment processes of cryptocurrencies in banks and other financial institutions in the country by the apex bank.
The vice president noted that in no distant time blockchain technology and cryptocurrencies, in particular, will challenge the conventional banking system, including reserve banking in ways that cannot be imagined.
He further stated that innovations in decentralized finance are making waves in challenging traditional finance.
He, therefore, urged the CBN to prepare itself for these innovations and figure how to regulate the system rather than try to ban it.
He said: “There is need for regulation and not prohibition of cryptocurrency. On the very topical issue of blockchain technology, digital assets, and cryptocurrencies let me say two things.
“First is that there is no question that blockchain technology generally and cryptocurrencies, in particular, will in the coming years challenge traditional banking, including reserve banking, in ways that we cannot yet imagine so we need to be prepared for that seismic shift.
“And it may come sooner than later. Already remittance systems are being challenged. Blockchain technology will provide far cheaper options for the kind of fees being paid today for cross-border transfers.
“I am sure you are all aware of the challenge that the traditional SWIFT system is facing from new systems like Ripple, which is based on the blockchain distributed ledger technology with its own crypto tokens. There are, of course, a whole range of digital assets spawned daily from blockchain technology.
“Decentralized finance, using smart contracts to create financial instruments, in place of central financial intermediaries such as banks or brokerages are set to challenge traditional finance.
“The likes of Nexo finance offer instant loans using cryptocurrency as collateral. Some reserve banks are investigating issuing their own digital currencies. Clearly, the future of money and finance, especially for traditional banking, must be as exciting as it is frightening.
“But as we have seen in many other sectors disruption makes room for efficiency and progress.”
According to the vice president, while he appreciates the position of the CBN and other financial institutions for pointing out abuses of cryptocurrencies, he noted that there is a need for further reflection on their position of the cryptocurrencies.
“Secondly, I fully appreciate the strong position of the CBN, SEC, and some of the anti-corruption agencies on the possible abuses of cryptocurrencies and their other well-articulated concerns. but I believe that their position should be the subject of further reflection.
“There is a role for regulation here. And it is in the place of both our monetary authorities and SEC (Security and Exchange Commission) to provide a robust regulatory regime that addresses these serious concerns without killing the goose that might lay the golden eggs.
“So, it should be thoughtful and knowledge-based regulation, not prohibition. The point I am making is that some of the exciting developments we see the call for prudence and care in adopting them, but we must act with knowledge and not fear,” Osinbajo said.