The House of Representatives underscored on Tuesday the urgent need to uphold national security and equity in the best interest of the nation’s economy as Nigerians continue to grapple with the challenges associated with digital assets, cryptocurrency, money transfer operators, payment gateways, and platforms.
The resolution was passed as a sequel to the adoption of a motion on Matter of Urgent Public Importance sponsored by Hon. Isiaka Ibrahim, who decried the plight of unsuspecting citizens.
In his lead debate, Hon. Ibrahim Hon. Isiaka, who acknowledged that Nigeria is grappling with the challenges of the floating of the naira, expressed concern over illicit transactions and money laundering using these means.
Hon. Isiaka expressed further worry at the huge sums of money that have been allegedly used to finance kidnappings, insecurity, banditry, and other illegalities.
He said: “The House acknowledges the burgeoning adoption, appreciation in value and utilization of digital assets globally and the gradual entrenchment of a global digital asset marketplace as financial and other technological advancements especially the creation of blockchain and cryptocurrency, enhance innovation and the investment by a significant population of Nigerians and others across the world in digital assets like cryptocurrency, non-fungible tokens (NFT’S), central (national) bank digital currencies (like the E-naira), security tokens, etc, the digitization of other investment assets and the gradual incorporation of digital assets into the very fabric of professional and private subsistence, traditional financial markets and its increasing importance to governments and businesses around the world.
“These advancements in financial and other technology have enabled the emergence of novel service providers like cryptocurrency exchanges (Binance, Coinbase, Kraken, etc.) that operate like traditional stock exchanges and allow for trade in digital assets, while international money transfer operators (IMTO’s), payment gateways, and platforms are evolving and adapting to prevailing global trends.
“The House is also cognizant of the growing global concerns about the national security implications of cryptocurrency transactions through cryptocurrency exchanges, including consumer and investor security, as these exchanges are said to enable money laundering by criminals and terrorists from and for their illicit activities, which is on the agenda of the current administration.
“As part of its sweeping market-friendly reforms designed to attract substantial foreign direct investment into the struggling economies of the countries, this administration reversed the ban on cryptocurrency transactions in Nigeria imposed by the previous administration. The current actions by the government should not be perceived by the global community and international investors as a policy somersault so early in the life of the administration and the existence of a hostile business environment.
“The House understands the concerns expressed by the CBN with regards to the likelihood of illicit transactions and money laundering on the cryptocurrency exchanges and their seeming use as an alternative platform for determining local foreign exchange rates; however, the US Treasury 2022 National Money Laundering Risk Assessment indicates that fiat and traditional financial activities contribute substantially higher (over 200%) than digital asset transactions to global money laundering activities.
“The conflict with the government about whether or not the crypto exchanges are determining the local foreign exchange rate and usurping the functions of the national bank does not appear to arise in other developed countries where appropriate statutes and regulations have been enacted and enforced to superintend crypto and other digital asset transactions.
“The government should not be seen as trying to ‘throw away the baby with the bath water’ without considering the benefits of digital asset transactions to the country.
“As is the case in other countries, the government’s close collaboration with Binance and other cryptocurrency exchanges is the best way to elicit their support in tracking, identifying, and facilitating the recovery of illicit and laundered funds on their platforms and assisting with the appreciation of the value of the naira.
“Significant losses of foreign currency inflow to the government’s coffers from the operation of IMTOs, payment gateways and platforms, utility sharing-based platforms, etc. that would ordinarily have contributed to the appreciation of the value of the naira have continued to subsist and should be curtailed.
“An outright ban by the government of IMTO’S and others, as was reported in the media, might not be the best cause of action
“The House observes that Binance and other cryptocurrency exchanges and cryptocurrency transactions have not been banned in the USA even after a US court ruling in the case filed by the US Securities and Exchange Commission (SEC) against Binance, which fined Binance $4.3 billion for violations of anti-money laundering laws, international financial transaction sanctions violations, and unlicensed money transmission and included the resignation of the company’s founder and Chief Executive Officer.
“The US observed the rule of law, formally instituting legal action against Binance for any perceived infraction. The continued existence and operation of Binance and other cryptocurrency exchanges in the US is obviously a recognition of the economic benefit to the country from the very auspicious global trend in cryptocurrency and digital assets.
“The US and Chinese governments are reported to be the 1st and 2nd largest holders of cryptocurrency in the world.
“The House acknowledges the assertion by the CBN Governor on Tuesday, February 27, 2024, that $26 billion has passed through Binance Nigeria in the last year from sources and users the government cannot identify.
“The governor curiously did not indicate whether any part of this amount was to the benefit of the country. This statement buttresses reports that in 2023 Nigeria was second only to India in the proportion of private wealth stored in cryptocurrency, accounts for over 66% of tracked interest in cryptocurrency in Africa, and has the highest reported peer-to-peer (P2P) trading volume in the world.
“This shows a very high level of participation of Nigerians in global cryptocurrency and digital asset transactions, and any untoward action by the government can jeopardise the fortunes of Nigerians who are carrying out legitimate transactions.
“Already, the recent actions by the government have resulted in cryptocurrency exchanges suspending the buying and selling of USDT and USDC with Naira, which is to the detriment of the Nigerian consumer. There are also questions about the processes and costs involved in the creation of the e-naira and its current status on the global cryptocurrency platform considering the current disposition of the government,” he noted.
To this end, the House mandated its House Committee on National Security and Intelligence to investigate the current status of cryptocurrency, blockchain, digital asset transactions, all the online peer-to-peer (P2P) marketplaces, international money transfer operators, payment gateways and platforms, cloud computing, infrastructure (networks), utility-sharing-based platforms, and their practices in Nigeria to identify threats to national security and gaps in legislative framework, statutes, and regulations to the detriment of the country.
The lawmaker also urged the NSA to engage all relevant stakeholders to initiate the necessary processes for establishing the required legislation and regulations.
The House also underscored the need to identify all the stakeholders operating in all categories listed above (1), 3 and their operations in Nigeria, establish their profile (in line with Know Your Customer/Business protocol), such as legal status and parent company, and assess their compliance with our existing statutes or complicity in infractions against Nigeria, including money laundering, illicit transactions, currency speculation, and bad practices.
The House also mandated its Committee on National Security to superintend the engagement of the office of the NSA, other relevant agencies, cryptocurrency exchanges, and stakeholders in tracking, identifying, and recovering illicit and laundered funds or assets.
The House also harped on the need to ensure equity, probity, transparency, the rule of law, and international best practices are observed by the government in investigating cryptocurrency exchanges and others.
To this end, the House mandated its Committee on National Security to investigate the current status of the e-Naira on the global cryptocurrency platform, the cost incurred, processes undertaken, and statutory compliance in creating the digital currency, and report back within 8 weeks for further legislative action.
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