Virtual Assets, Cryptocurrencies Risky for Nigeria – ICPC Boss

Chairman of the Independent Corrupt Practices and Other Related
Offences Commission (ICPC), Prof. Bolaji Owasanoye, SAN, on Tuesday
said virtual assets and cryptocurrencies are risky for
implementation in Nigeria.

Prof. Owasanoye made this known in his presentation to the
Senate Committee on Banking, Insurance and Other Financial
Institutions during its hearing on the Central Bank of Nigeria’s
decision to stop financial institutions from transacting in
cryptocurrencies and matters arising therefrom.

He said, “Virtual and cryptocurrencies pose serious legal and
law enforcement risks for Nigeria. The current National
Identification Number registration and linking with SIM cards is a
pointer to the fact that insurgents, terrorists, kidnappers,
bandits, and drug merchants have used the anonymity of unregistered
SIM cards to commit their crimes with relative ease.

“Cryptocurrencies guarantees similar anonymity and can easily be
used as leverage for terrorist financing and other crimes. With the
NIN registration, cryptocurrencies may become an alternative
payment platform for kidnappers and this would be impossible for
law enforcement to agencies to trace.”

The ICPC boss cited a case study of a current investigation by
the Commission on money laundering involving several hundreds of
millions of naira.

According to him, “The main suspect used technology in placing
the money in the banking sector. A sizable amount was traced to
several bank accounts but before investigators recovered some of
the money, a large proportion had been made to disappear using
serpentine ICT-aided transfer schemes that has so far eluded
investigators.

“While the persons whose accounts were used have been located,
the criminal mastermind has remained invisible and
unidentified.

“This real ongoing case is a glimpse into the world of anonymity
of virtual or digital transactions. With cryptocurrencies, the
wallet of the user of cryptocurrency system only store information,
or encrypted links in the Blockchain where transaction confirmation
can be found.

“There is no movement of any ‘currency’ in the real sense of the
word. By their very nature, they provide considerable anonymity
that is almost impossible to be accessed by unauthorized persons,
including law enforcement authorities.”

Prof. Owasanoye identified the use of virtual assets and
cryptocurrencies for criminal activities as a major risk associated
with them.

“The use for criminal activities is the most obvious risk of
virtual assets and cryptocurrencies. It has been reported that
‘criminally associated bitcoin addresses sent over $3.5 billion
worth of bitcoin in 2020’.

“This figure includes BTC addresses controlled by dark markets,
ransomeware actors, hackers, and fraudsters. Most of this bitcoin
will ultimately need to be laundered by these criminals, meaning it
will make its way to an exchange where it can be converted to fiat
currency and transferred to a bank,” the ICPC chairman said.

He also listed other risks of the use of virtual assets and
cryptocurrencies to include: risk to finance of government, risk of
theft of cryptocurrencies, abuse as medium of payment for hackers
and ransomeware, risk of exit scams, risks of use of crypto assets
for ponzi schemes, risks of tax evasion, and risk as a source of
corruption-linked illicit financial flows.

He further noted that the Central Bank of Nigeria’s ability to
regulate monetary policy will be lost due to the fact that
cryptocurrencies are issued by private entities, which are foreign,
and not issued or regulated by the bank.

“It is plausible that we cannot wish virtual assets away.
Central Banks in many jurisdictions are considering floating
officially recognized cryptocurrencies. Whether the time is right
for the Central Bank of Nigeria to follow suit is anybody’s guess,
but legal guidance is needed if any fresh initiative in that
direction is to have legal force,” he added.

Chairman of the Independent Corrupt Practices and Other Related
Offences Commission (ICPC), Prof. Bolaji Owasanoye, SAN, on Tuesday
said virtual assets and cryptocurrencies are risky for
implementation in Nigeria.

Prof. Owasanoye made this known in his presentation to the
Senate Committee on Banking, Insurance and Other Financial
Institutions during its hearing on the Central Bank of Nigeria’s
decision to stop financial institutions from transacting in
cryptocurrencies and matters arising therefrom.

He said, “Virtual and cryptocurrencies pose serious legal and
law enforcement risks for Nigeria. The current National
Identification Number registration and linking with SIM cards is a
pointer to the fact that insurgents, terrorists, kidnappers,
bandits, and drug merchants have used the anonymity of unregistered
SIM cards to commit their crimes with relative ease.

“Cryptocurrencies guarantees similar anonymity and can easily be
used as leverage for terrorist financing and other crimes. With the
NIN registration, cryptocurrencies may become an alternative
payment platform for kidnappers and this would be impossible for
law enforcement to agencies to trace.”

The ICPC boss cited a case study of a current investigation by
the Commission on money laundering involving several hundreds of
millions of naira.

According to him, “The main suspect used technology in placing
the money in the banking sector. A sizable amount was traced to
several bank accounts but before investigators recovered some of
the money, a large proportion had been made to disappear using
serpentine ICT-aided transfer schemes that has so far eluded
investigators.

“While the persons whose accounts were used have been located,
the criminal mastermind has remained invisible and
unidentified.

“This real ongoing case is a glimpse into the world of anonymity
of virtual or digital transactions. With cryptocurrencies, the
wallet of the user of cryptocurrency system only store information,
or encrypted links in the Blockchain where transaction confirmation
can be found.

“There is no movement of any ‘currency’ in the real sense of the
word. By their very nature, they provide considerable anonymity
that is almost impossible to be accessed by unauthorized persons,
including law enforcement authorities.”

Prof. Owasanoye identified the use of virtual assets and
cryptocurrencies for criminal activities as a major risk associated
with them.

“The use for criminal activities is the most obvious risk of
virtual assets and cryptocurrencies. It has been reported that
‘criminally associated bitcoin addresses sent over $3.5 billion
worth of bitcoin in 2020’.

“This figure includes BTC addresses controlled by dark markets,
ransomeware actors, hackers, and fraudsters. Most of this bitcoin
will ultimately need to be laundered by these criminals, meaning it
will make its way to an exchange where it can be converted to fiat
currency and transferred to a bank,” the ICPC chairman said.

He also listed other risks of the use of virtual assets and
cryptocurrencies to include: risk to finance of government, risk of
theft of cryptocurrencies, abuse as medium of payment for hackers
and ransomeware, risk of exit scams, risks of use of crypto assets
for ponzi schemes, risks of tax evasion, and risk as a source of
corruption-linked illicit financial flows.

He further noted that the Central Bank of Nigeria’s ability to
regulate monetary policy will be lost due to the fact that
cryptocurrencies are issued by private entities, which are foreign,
and not issued or regulated by the bank.

“It is plausible that we cannot wish virtual assets away.
Central Banks in many jurisdictions are considering floating
officially recognized cryptocurrencies. Whether the time is right
for the Central Bank of Nigeria to follow suit is anybody’s guess,
but legal guidance is needed if any fresh initiative in that
direction is to have legal force,” he added.