Within a period of roughly 13 years from its advent, cryptocurrency has gained wide recognition as a digital asset and has attracted interesting, albeit different and conflicting, reactions from economists, financial market analysts, investors, and governments alike. There have also been concerns as to how real and sustainable the development of this digital asset is, as well as the hope it holds for the future of fintech globally.
Prescriptively, various countries have taken different positions with respect to the acceptability of crypto within their territories. These positions reflect each country’s monetary policies, the perceived economic impact, the volatile nature of the digital asset, among other factors.
The reactions by states can be broadly grouped into the following categories:
(i) states that have legalized crypto,
(ii) states that are indifferent to it,
(iii) states that have regulated it,
(iv) states with partial prohibition, and
(v) states with absolute prohibition.
El Salvador, through its Bitcoin Law, became the first country to recognize Bitcoin as legal tender. Other states such as Uzbekistan and Ukraine (following its invasion by Russia) have also legalized crypto.
States that are indifferent include Belgium, Spain, Italy, Cyprus, and South Africa. The attitude of their governments is to merely warn citizens about the risks involved in using crypto while reiterating that it is not accepted as legal tender. Some of these states consider regulation of crypto assets unripe and unnecessary, owing to the novelty of the technology which they believe requires further study. Many also promise future action while allowing free exchange in crypto without regulatory or tax restrictions within their territories.
In places like the United States and Israel, crypto is allowed with certain regulatory and tax interventions. The assets are treated as barter items, commodities, property, or funds whose profits are accordingly taxable. Dealing in crypto is legal in these jurisdictions for both individuals and corporations, subject to requisite registrations, licenses, approvals, and payment of applicable taxes.
Conversely, some other states such as Nepal, China, Bangladesh, Bolivia, and Egypt have imposed outright prohibitions on all dealings in crypto through executive orders or legislative or regulatory interventions. In such countries, individuals could be arrested and prosecuted for holding crypto assets.
States like Jordan, Saudi Arabia, and the United Arab Emitart (“UAE”) permit holding, trading, mining, and other crypto-related activities by individuals and corporations.
In the case of Nigeria, there is no law prohibiting the holding, trading, mining, or use of cryptocurrency whatsoever. However, the Central Bank of Nigeria (“CBN”) Circular of February 2021 prohibits banks and financial institutions from trading in or maintaining accounts used for crypto transactions. There have been several arrests by the Nigerian police predicated on this circular. Aside from the fact that many of these arrests appear to serve personal interests, they are actually unlawful.
It is important to emphasize that in Nigeria, nothing is a crime unless it is expressly stated in a written statute with a clearly defined punishment. The case of AOKO v. Fagbemi (1961) 1 All NLR 400 is instructive on this point.
The CBN Circular of February 2021 is not an Act of the National Assembly but a policy document of the regulatory bank directed at banks and other financial institutions. At best, it is a subsidiary piece of legislation made by the CBN in the exercise of its supervisory and regulatory powers pursuant to the CBN Act.
There is no Nigerian law that makes it illegal to trade in or deal with cryptocurrency. Accordingly, it is safe to conclude that the arrest of persons on the allegation of dealing in crypto, without more, is illegal and constitutes a breach of fundamental rights as enshrined in Section 36 of the Nigerian Constitution, for which redress may be sought in a court of competent jurisdiction. This reasoning has also received judicial approval in CBN Governor v. Rise West Technologies Ltd & 5 Ors, Suit No: FHC/ABJ/CS/822/2021.
It follows, therefore, that an arrest can only be lawful upon a reasonable suspicion that an offence has been or is being committed. Since merely holding or dealing in crypto does not constitute an offence under any written law in Nigeria, any arrest based solely on such grounds is unreasonable and unlawful.
— Authored by Oluwagbemiga Alana (Associate)