Sagay, Others seek Regulatory Framework for Virtual Currency

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Photo Credit: www.due.com

Senate Committee on Anti-Corruption Chairman Senator Chukwuka Utazi, Central Bank of Nigeria (CBN) Governor Godwin Emefiele and Presidential Advisory Committee Against Corruption (PACAC) Chairman Prof Itse Sagay (SAN) have called for a legal framework to regulate virtual currency.

They made the call at a two-day seminar in Abuja with the theme: “Understanding the interface between cryptocurrency and money laundering”.

The seminar, organised by PACAC, ends today.

Senator Utazi said virtual platforms of value exchange, such as cryptocurrency, were becoming the new order.

According to him, there is a murky, loosely regulated framework for the use of cryptocurrencies, which he said rely on cryptography that uses hidden codes to communicate.

“Users can make transactions directly under pseudonyms, taking away power of control from banks and governments, and it is not controlled by a central authority.

“This scenario creates a monstrosity of huge proportions for governments and regulatory authorities.

“In an age where people hide ill-acquired assets and use same for illegal means to sponsor terrorism and all manner of threats to human existence, there should be legislative and regulatory frameworks that understand the dynamics of this genre of economic activity to place society a step ahead of its rapid evolution.

“There is, therefore, a yawning need for tighter regulation.

“The associated risks of virtual currencies mutate everyday and it is important that all stakeholders understand what these risks are, and what legislative, regulatory and criminal justice responses to them should be.”

Emefiele, represented by a senior CBN official Mr K. N. Amugo, said information from coinmarketcap.com indicates that cryptocurrencies’ global market capitalisation currently stands at approximately $203billion as at October.

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He noted that the cryptocurrency market in Nigeria is currently unregulated.

“Presently, there is no legal framework for the regulation of cryptocurrencies in Nigeria.

” Based on existing legislations, the usage of cryptocurrency in Nigeria is neither permitted nor prohibited,” he said.

The CBN governor said the apex bank constituted an inter-agency committee on virtual currencies, comprising regulators and law enforcement agencies with a mandate to carry out studies on the subject.

As well as building staff capacity and issuing cautionary public notices, Emefiele said the CBN issued a circular to banks and other financial institutions.

He said it was on the need to ensure that existing customers who are virtual currency exchangers have effective anti-money laundering/combating the financing of terrorism (AML/CFT) controls that enable them comply with identification, verification and transactions monitoring requirements.

Banks were also directed to render suspicious transaction reports to the Financial Intelligence Unit (NFIU), he added.

Prof Sagay said while cryptocurrency yields benefits to those providing the service or trading with it, it was more like a “stateless phenomenon” that poses challenges.

“There is a dark side, which includes the use of cryptocurrency for criminal activities.

“Due to the upswing in the use of virtual currencies by criminal groups, legislative and regulatory frameworks need to be adapted and updated in response to these new challenges, particularly to the fight against money laundering and terrorist financing.

“Because of the encrypted nature of cryptocurrency, operators evade tax.

“It is necessary that there should be some regulations provided in this sector in order to prevent it from being a new avenue for criminal activities and evasion of social responsibility,” he said.

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According to Prof Sagay, the almost invisible and decentralised nature of virtual currencies creates a potential for them to be used for money laundering activities.

He said the immediate question that begs for answer includes how to regulate trading in virtual currencies and how to prevent them from being used as an avenue for crime.

The keynote speaker, National Information Technology Development Agency (NITDA) Director-General Dr Isa Ibrahim, said cryptocurrency was one of over 700 applications of distributed ledger transactions, otherwise known as blockchain.

He noted that Nigeria’s anti-money laundering legislations “were made in respect of local and foreign legal tenders,” adding that “the phenomenon of cryptocurrency was not envisaged.”

“In essence, Nigeria has no current legal regime to prevent the use of cryptocurrency as a tool of money laundering.

“The consequences of this exposure are grave, especially considering its implications on our anti-graft war,” he said.

On how the cryptocurrency works, NITDA Director-General, represented by a senior legal officer Olufemi Daniel, said it uses blockchain technology, which, like the internet, has a robust architecture and cannot be controlled by a single entity.

According to him, the biggest application of blockchain is cryptocurrency, which he described as a digital representation of value used as a medium of exchange, a unit of account or a store of value.

“Blockchains are distributed, not centralised; open, not hidden; inclusive, not exclusive; immutable, not alterable, and secure.

“Blockchain cannot be corrupted…with all its potential, blockchain can be a force for good in our world today.

“The innovativeness of criminally minded person is incredible.

“A desperate person seeking to ward off law enforcement agencies would see cryptocurrency as a veritable means of money transformation.

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“Cryptocurrency will challenge the very need for banks, stock markets and other government sanctioned intermediaries.

“NITDA is at the forefront of ensuring that the right regulatory frameworks are in place to accentuate rather than stifle the cryptocurrency innovation that has swept the global financial landscape,” he said.

Source: The Nation

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