The recent directive by the Central Bank of Nigeria to shut down crypto trading in the country has driven conversations by governments around the world on how to regulate Bitcoin and other cryptocurrencies without stifling innovation.
Nigeria’s directive which was met with backlash had prohibited banks and financial institutions from facilitating payments for cryptocurrency exchanges as well as ban crypto trading in the country based on the apex financial institute’s inability to regulate cryptocurrencies.
The Apex bank also said the ban was put in place to avoid money laundering and terrorism.
Globally, countries that have been unable to regulate crypto trading which by design are intended to be decentralised and beyond their reach, are being forced to choose between shutting it down or be part of a rapidly evolving sector of global finance that pivots on innovation.
For instance in Iran, officials recently targeted crypto exchanges and even blamed the country’s high level of air pollution on Bitcoin mining.
In the United States this week, Federal Reserve Chairman Jerome Powell raised concerns about the role cryptocurrencies play in facilitating criminal activity, as well as their infamous volatility, calling Bitcoin “more of an asset for speculation” than a substitute for the US dollar.
Six other countries have also banned crypto trading all bordering on fears that bitcoin could potentially crash the local currency.
The People’s Bank of China, which is China’s central financial regulatory authority, placed a ban on all domestic and foreign cryptocurrency exchanges in the country in 2017. China-based financial institutions are also banned from dealing and funding cryptocurrency related activities.
This move was said to have been made in a bid to curb overseas transactions leading to regulatory compliance evasion, which the government feared would pose a higher risk of fraud.
In 2014, the central bank of Bolivia issued a ban on bitcoin and every other currency not regulated by states, countries, and economic area. The government of Bolivia says the ban is necessary to protect the boliviano, the country’s currency, and to protect citizens from unregulated currencies that could lead them to lose their money.
Morocco’s foreign exchange office and central bank prohibits the use of cryptocurrency for transaction in the country. Any citizen caught engaging in transactions involving the virtual currency will be fined. Illegal activities such as sale of drugs and weapons were stated as concerns that led to the ban.
Bitcoin and other digital currencies are currently banned by the Ecuadorian government. The central bank of Ecuador also prohibits the buying and selling of cryptocurrencies through the internet. The bank maintains that cryptocurrency is not a means of payment in the country.
In Bangladesh, the use of bitcoin is considered illegal as in 2017, the Bangladesh bank issued a ban on cryptocurrency. The bank said this is because cryptocurrencies do not conform to the Foreign Exchange Regulation Act, 1947, Anti Terrorism Act 2009 and Money Laundering Prevention Act, 2012. It asked citizens to refrain from all transactions involving virtual currencies.
In 2017, Bitcoin and other cryptocurrencies became considered as illegal forms of financial tender in Nepal, according to Nepal Rastra bank act and the 2019 foreign exchange regulation act. Shortly after the ban, a dozen individuals were arrested for involvement in illegal bitcoin exchange in the country. The Nepal government maintains the ban is because bitcoin is not classified as a currency in the country. The country also does not have technology to regulate cryptocurrency transactions.
There still exists a lot of global debate as to whether cryptocurrency should be recognized as legal tender and how it should be regulated.
The laws on cryptocurrency are, however, frequently changing as many countries that had banned virtual currency had later on lifted the ban completely or restricted its use.