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Lawyers sue CBN, SEC over prohibition of cryptocurrencies

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THE Digital Rights Lawyers Initiative has sued the Central Bank of Nigeria (CBN) and the Securities and Exchange Commission (SEC) over the recent directive by the apex bank banning cryptocurrencies trading.

Last week, a memo from the CBN had warned Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs), Other Financial Institutions (OFIs and members of the public to desist from dealing in cryptocurrencies and other related transactions because of the “risk associated” with the coins.

It further ordered banks to close all the accounts of customers transacting and dealing in Bitcoin immediately.

In a bid to attend to the public outcries that greeted the decision and further justify itself, the CBN released a statement on Sunday to say it prohibited banks from dealing in cryptocurrencies because of the unregulated nature of the business. The bank also cited the loss of investments, money laundering, terrorism financing, illicit fund flows, and criminal activities.

Why some persons have made arguments in favour of the CBN, some financial experts have also argued that the CBN should have put regulatory frameworks in place instead of prohibiting banks and Nigerians from trading it.

In a 2020 report, Nigeria emerged as the second biggest market for bitcoin, trading over 60,000 bitcoins, valued at $566 million, between 2015 and 2020.

Read AlsoCryptocurrency market spikes by $13 billion after recording poor trades in March

Since 2017, the bitcoin trade volume in Nigeria has increased by 19% while the highest volume of trade (20,504.50) was recorded in 2020, Quartz Africa reports.

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The country trails behind only the United States on Paxful, a leading peer-to-peer bitcoin market place. The sharp rise in bitcoin trade, particularly in 2020, has been attributed to the lockdown and the #ENDSARS protest across Nigeria.

However, in Suit No. FHC/L/CS/ 188/2021 filed on Monday, February 8,  before the Federal High Court, Lagos, the group, said the CBN, the first defendant, lacked the power to restrict financial institutions from dealing in cryptocurrency transactions.

The digital rights lawyers argued that the second defendant, SEC, had in a circular dated September 14, 2020, declared cryptocurrencies as legal digital assets “protected under section 44 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended)”.

Therefore, the lawyers asked the court to validate the Investments and Securities Act 2007, which made SEC the apex regulatory body of the Nigerian capital market.

They also prayed the court to declare the CBN action as “ultra vires, unconstitutional, null and void” while also seeking a “perpetual injunction restraining the 1st defendant from regulating and/or further regulating virtual currencies/ cryptocurrencies in Nigeria.”

The suit, which has not yet been assigned to any judge, was filed by the group’s counsel, Irene Chukwukelu.

Vincent Ufuoma is a reporter with The ICIR. He is a lover of God, truth, knowledge and justice.

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