Can the CBN really ban persons transacting in or operating cryptocurrency exchanges from access to banking services? What stakeholders are saying.

Whether  the CBN, by virtue of its statutory powers, has the power to order  DMBs, NBFIs, and OFIs to deny banking services to a set of persons, entities, or an entire industry where such persons or entities have not been declared illegal or criminal under any law or by any court of competent jurisdiction in Nigeria. Senator Ihenyen does not think so. According to him, “[CBN] can only regulate how banking services could be offered to these persons or entities, applying KYC/AML regulations. Total ban, unlike its January 2017 letter, appears to be rather arbitrary and lazy—an approach that I consider inconsistent with the CBN’s typically well-considered approach to issues.”

Regulation vs Strangulation: The way Forward

There is no doubt that regulation is vital. But as the SiBAN President, Senator Ihenyen, puts it, “…. the question is why should there be regulation? What kind of regulation? When should regulation come? How should regulation be? Where should it apply? [and] Who should it apply to?”

When it comes to disruptive innovations such as crypto technology for example a number of these questions remain largely unanswered by regulators. And when innovators—ever inspired to innovate and disrupt—ask questions or question why what is what and that is that, some of these “regulators remind you that they hold the knife and the yam.” This is a self-defeating approach to regulation. Consequently, opportunities are lost.

Recommendations on best approaches to adopt

In making recommendations, I recall the enriching engagement I had with some members of SiBAN on its virtual platform about the importance of what was described as “developmental regulation”, in contrast to restrictive regulation.

First, regulators must invest in blockchain & cryptocurrency education. This has become very necessary in an increasingly decentralized age. Chris Ani, founder of Digital Abundance Academy (DABA), observes that “the biggest tool of regulation is education not some sort of hammer.” When there is consumer and investment education, enforcements increasingly become lean and less tedious. “A new approach, informed by the desire to learn, unlearn, and relearn should be adopted by policymakers and regulators”, says Senator Ihenyen.

Second, there must be regulatory clarity. How the SEC, for instance, intends  to regulate “any person … whose activities involve any aspect of Blockchain-related and virtual digital asset services”, as contained in its recent statement on digital assets remains a puzzle to be solved. I submit that the statement is vague and believe that when the eventual regulation eventually drops, this would be clearer.

Third, regulators must shun restrictive policies that may end up  inhibiting the growth of an emerging or nascent industry. It must approach the industry like a farmer, not a rat killer. Pest control (such as consumer protection and investment safety) should not and cannot be enough reason to kill the crops (innovation). It is a failure of regulation. Regulation has moved past that.

Lastly, self-regulation should be encouraged  in nascent industries, such as the blockchain & crypto industry. Referring to  his remarks on self-regulation at the Off Charts Global Conference organized by Binance recently, Senator Ihenyen noted that self-regulation is an important first step to regulation that regulators, especially in developing countries with relatively lean public purses, must learn to integrate into their regulatory frameworks. Through self-regulation, industry players may adopt industry code of conduct, standards, and practices that ensure consumer protection and investor safety in the industry. It is not also out of place for regulators to support these self-regulatory bodies, ensuring that they are helping to grow and sanitize the nascent industry pending full regulation. This also avoids outright bans or zero regulation, what I consider two of the most risky  and uncertain state a regulator should put any industry in.

Source: @ Ndubisi Ekekwe (https://www.linkedin.com/in/ndubuisi-ekekwe-36068210?lipi=urn%3Ali%3Apage%3Ad_flagship3_profile_view_base_contact_details%3B3584b786-c6e5-4817-8e9b-4ca18d30af62)