Developing a Cryptocurrency Policy

The fusion of technology with financial services has transformed the financial sector globally.[1] This transformation has been described as FinTech.[2] An aspect of FinTech redefining the use of currency as a medium of exchange is cryptocurrency.

Cryptocurrency simply connotes digital or virtual currency. It is a decentralised currency which does not exist in the physical form but electronically and used for transactions. Cryptocurrency has been referred to as a medium of exchange like normal currencies such as the United States Dollars, but designed for the purpose of exchanging digital information through a process made possible by certain principles of cryptography.[3] It has been acclaimed that the first cryptocurrency known as Bitcoin was developed in 2008 by Satoshi Nakamoto as a peer-to-peer electronic cash system payment.[4]

Cryptocurrency is used for trading and accepted for payment of goods and service by several retail stores. Cryptocurrency has been hailed for its speed and security since its transactions are verified before being validated and once validated becomes permanent and unalterable.

The entrance of cryptocurrency to the financial sector has indeed caused a disruption and redefined currency. Concerns have been raised on whether the use of cryptocurrency by the parties to a transaction dispense with the need for it to be officially recognised by law as a medium of exchange or whether it needs to be recognised by law as a legal tender before parties to a transaction can use or accept it as a medium of exchange.

A cardinal principle of contract is that parties can determine the terms of their contract and the court would not make contract for the parties.[5] Thus, where the parties to a contract have agreed to use a cryptocurrency as a medium of exchange for their transaction it becomes acceptable and binding except where existing law makes it illegal. Thus, to preclude the use of cryptocurrency for transaction when the law is silent on its usage or does not prohibit it would infringe on the right of parties to freely enter into a contract.

Although parties can by contract choose cryptocurrency for their transaction, the need for it to be recognised by law and regulated cannot be jettisoned. As opined by the International Monetary Fund (“IMF”), cryptocurrency constitute a potential risk of being used to commit crimes such as fraud, money laundering, tax evasion and financing of terrorism.

Mechanism for Cryptocurrency Policy

The decentralised nature of cryptocurrency makes its regulation a herculean task. Typically, currencies are issued by the central bank of a country, but cryptocurrency is a disruption of this trend. Hence issuing a policy for Bitcoin and other cryptocurrencies which were not issued by the central bank remains a concern.

However, the potential risk posed by cryptocurrency as identified by the IMF including the need for consumer protection makes it apt for cryptocurrency to be regulated.

In Nigeria, the current laws neither provide for nor make it illegal to use cryptocurrency. Thus, in December 2016, the Central Bank of Nigeria (“CBN”) set up a committee to deliberate on the possibility of legalising the use of bitcoin for transactions.[6] In January 2017, the CBN stated that cryptocurrencies are not legal tenders in Nigeria and financial institution that transacts in it does so at their own risk.[7]

Notwithstanding the warning of the CBN and other central bank around the world, cryptocurrency is still being used for transactions since it is acceptable to the parties as a medium of exchange. This presupposes that mere caveats will not stop the use of cryptocurrency except there is a specific legislation on cryptocurrency .

Recommendations and Conclusion

Prohibiting the use of cryptocurrency for transaction may prove difficult for the CBN and the central bank of other countries. This is because it is decentralised, exists in electronic form, and not issued by the central bank.

According to Bill Gates, the future of money is cryptocurrency. Thus, in my opinion regulating and not prohibiting cryptocurrency should be the adopted mechanism.

A law specific to cryptocurrency should be enacted. The law should provide for licensing of dealers in cryptocurrency, compel dealers to report transactions conducted, impose Know-Your-Customer obligations on the dealers, and as well provide for the prosecution of those who use cryptocurrency to commit crime or hide proceeds of crime. The law should also be emphatic on permissible and non-permissible cryptocurrency transactions.

In addition, the current laws and monetary policies should be amended to provide for the use of cryptocurrency as an alternative currency for the permissible transactions.


[1] Akinkunmi Akinwunmi Esq. LLM in Business and Technology Law (University of California, Berkeley); Follow on Twittter @Akin_ATG

[2] Read my article “Legal Regime of FinTech in Nigeria”,

[3] What is Cryptocurrency? Carter Graydon, published September 16, 2014 on accessed February 20, 2017.

[4] Numerous cyptocurrencies have been developed since 2008 and has flooded the internet.

[5] P.M. Ltd v. The M.V. Dancing Sister (2012) 4 NWLR (PT.1289) 169 SC at 197, Paras. C-D

[6] CBN May Legalise Use of Bitcoin for Transactions, published in Thisday Newspaper, Volume 21, No. 7915 on December 20, 2016, page 40.

[7] CBN to Nigerians: stay away from bitcoin, published January 18, 2017, retrieved on March 2, 2017 from


One thought on “Developing a Cryptocurrency Policy

  1. Very good and informative article Akin. While i agree that regulation is necessary mainly due to fraud, cryptocurrency prides itself on being traceable due to the very system of verification you noted above. Even Central banks get hacked nowadays.This also is a plus for cryptocurrency as there exist not one Central registry but a chain of registries – as you again rightly mentioned – making it more difficult to hack. I also hold an opinion that over regulation kills innovation. Radical right!!!


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