…says Cryptocurrencies, Bitcoin, others lack CBN backing
The Nigeria Deposit Insurance Corporation has disassociated itself from the use of digital currencies for conducting financial transactions in the country.
The NDIC Deputy Director, Research, Policy and International Relations, Dr. Kabir Katata, said at the NDIC annual workshop for financial journalists in Kano that Nigerians should desist from such form of payment. The theme of the workshop was “Financial Disruption of Digital Currency and its Consequences on the Banking System and Deposit Insurance System.”
Katata said no regulator in the world had ever come out openly to support the use of digital currencies for transactions.
A digital currency is a means of payment that only exists electronically. Like traditional money, such as banknotes, they can be used to buy physical goods and services.
The NDIC deputy director explained that cryptocurrencies constituted a threat to the financial markets, because they can be issued without the involvement or backing of a central bank or other traditional financial sector role players.
Some risks involved in the use of digital currencies, according to him, are financial integrity, money laundering and other financial crimes and non-user market participants.
“Other risks include the facts that they may lose their money on an exchange, their DC units may be stolen from their digital wallets, the value of DCs has been very volatile, transactions in DCs may also be misused for criminal activities,” he added.
Identifying the negative impact of private Digital Currencies on banks and deposit insurance, the NDIC deputy director said if widely used, they could challenge the intermediation role of current actors in the financial system, especially banks.
“If DCs are to become widespread, any ensuing disintermediation might have an impact on the mechanisms for savings and credit and, therefore, funding/operations for a DIS,” he said.
Katata also warned that “users of payments and transfers systems may also be pressed to undertake unwanted credit; operations smart contracts that are automatically executed may enhance instability, if the system fails to check the solvency of each counterpart.”
He noted that it’s unclear who would take up the roles of traditional financial intermediaries in an economy based on the use of Digital Currencies schemes, adding that public authorities and central banks around the world were closely monitoring developments in digital currencies and studying their implications for the apex banks, the financial system and the economy.