ENFORCEABILITY OF CONTRACTS INVOLVING CRYPTOCURRENCY IN NIGERIA
Crypto-currency is a digital currency/asset created and designed to function as a medium of trade in which specific coin ownership records are saved and stored in a ledger prevailing in a form of computerized database working on strong cryptography to secure transaction records, verify the transfer of coin ownership and regulate the creation of additional coins (mining). It is not a corporeal property i.e. it does not exist in physical forms such as coin or paper money and is typically not issued by a central authority.
Crypto-currencies normally use decentralized control as contrasting to central banking systems and centralized digital currency. Each crypto-currency works through distributed ledger technology as to when it is implemented with decentralized control which is usually a block chain that serves as a public financial database.
Numerous companies have issued their crypto-currencies that are often called tokens and specifically, these can be traded for the good or service that the company provides. There are about 6,700 publicly traded and different crypto-currencies and increasing more as private companies keep introducing crypto-currencies.
Crypto-currency continues raising money through initial coin offerings ICOs, to proliferate. The total value of all crypto-currencies on April 13, 2021, was more than $2.2 trillion through various sources and the most popular digital currency ‘Bitcoin’ has a total value of about $1.2 trillion. Bitcoin nearly doubled in value this year as its acceptance for payments has increased in the world and has become the biggest crypto-currency and hit a record high of $60,000 with support from high-profile patrons such as Tesla Inc CEO Elon Musk.
In terms of legal recognition of crypto-currency in Nigeria, it has been dealt unfavorable blow by government policies checking the unregulated flow and dealing in crypto through financial institutions. The Nigerian Government through the Central Bank of Nigeria has taken steps to restrict the crypto-currency market by barring financial institutions from participating in them. On the 5th of February 2021, the Central Bank of Nigeria (CBN) released a letter addressed to banks and other financial institutions which stated that dealing in crypto-currencies and facilitating payment for crypto-currency exchanges are prohibited. The CBN further instructed all banks and other financial institutions to identify individuals or entities transacting in crypto-currency or operatingcrypto-currency exchanges and close the accounts of such persons or entities.
The SEC (Security and Exchange Commission) empowered by section 13 of the Investment and Securities Act 2007 as the capital market regulator in the country maintained a liberal stand on the use of crypto-currency by a statement issued on 14thSeptember, 2020 where it announced its intention to regulate digital asset thereby creating an imbalance with the CBN’s directive banning crypto-currency which is believed to have been informed by the ENDSARS protest which saw to the use of crypto-currency as the medium for funding of the protest when bank accounts opened for the funding were ordered to be closed by the same CBN. The CBN further issued a Press Release on the 7th of February 2021, addressing its earlier directive and providing reasons for its prohibition of crypto-currency transactions by banks and other financial institutions.
The CBN stated in the Press Release that crypto-currencies are issued by unregulated and unlicensed entities and as such, the use of crypto-currencies in Nigeria contravened existing laws as they are not legal tender. It also identified the anonymity of crypto-currency as an issue. It stated that anonymity and the lack of KYC made it susceptible to illegal use such as money laundering and financing of terrorism. Another justification was the volatility of crypto-currencies which it said has threatened the stability of financial systems in other countries.
In view of CBN’s prohibition, can an individual or entity approach the Nigerian Court for the enforcementof contract involving crypto-currency where there is a breach of contract?
Although, we are yet to see any existing law prohibiting the possession and trade of digital asset,contracts contrary to public policy are unenforceable as they are void and cannot be the foundation for any legal right, this is the position of the court in Chief A.N Onyiuke III v G.E Okeke (1976) 1 All N.L.R. (Part 1) p. 181 at p. 187. Also in Nnadozie v. Mbagwu (2008) 3 NWLR (Pt. 1074) 363 at Pp. 394-395. paras. H – B, the Supreme Court, Per Aderemi JSC has held that an agreement is illegal if the consideration or the promise involves doing something illegal or contrary to public policy and such cannot be enforced by the court.
The Central Bank of Nigeria has prohibited banks and financial institutions from allowing transactions involving crypto-currency by reason of public policy and it is the position of the law that contracts contrary to public policy are unenforceable. Although crypto enthusiasts in exercising their freedom of contract have found a way around transacting through pair to pair,enforceability of contracts involving crypto-currency in the Nigerian court is doubtful.
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