It’s been more than a year since the Central Bank of Nigeria (CBN) issued a circular to banks and other financial institutions prohibiting cryptocurrency transactions and facilitating payments for crypto exchanges.
It is prohibited for Nigerian banks to serve customers who deal in crypto assets.
In response to the looming threat of massive fines, banks eagerly complied with the law and shut down the accounts of cryptocurrency exchange businesses and private users. The CBN’s action was not ill-conceived at the time.
Read: Crypto ban: CBN rule does not criminalize cryptocurrencies – Moghalu
Growing crypto adoption in Nigeria despite CBN ban
With Africa’s largest economy facing growing economic challenges, more and more young people despite the crypto ban with banks, use crypto to hedge against currency devaluation, remit money cheaply or earn a living.
The lion’s share of peer-to-peer transactions in Africa still belongs to Nigeria. Nigeria currently has a P2P volume of $400 million on two major platforms (Paxful and Localbitcoins), followed by Kenya with more than $160 million, and South Africa with $117 million.
Nigeria is not the only country in which crypto communities have found ways around government restrictions. An annual report on crypto adoption in 154 countries put Nigeria in 6th position in 2021, part of a wave that saw crypto traded in Africa grow 1,200% in value.
In spite of the government clampdown in early 2021, Africa’s largest crypto market adapted by switching to P2P platforms such as Paxful and Binance which made it more difficult for the government to monitor and restrict such transactions.
Read: IMF warns that no single country can stop cryptocurrency on their own
Rules are changing
Moreover, the CBN’s rationale for enforcing the ban is undermined by the bias that crypto is anonymous in operation.
Local centralized exchanges have pre-empted regulation, and they only accept users who comply with rigorous anti-money laundering and know-your-customer policies.
Every transaction is associated with a user directly, especially at the entry and exit points to the centralized crypto system, because users give detailed personal information.
It is near impossible to get away with fraud and other crimes facilitated through exchanges, if you are a person of interest, because these exchanges use extremely sophisticated blockchain monitoring tools. Even in the regulated banking system, there is probably less traceability on those venues.
While the CBN appears to be taking the right steps in developing the eNaira by partnering with Bitt Inc., incentivizing the population to switch from crypto to e-Naira has proven challenging.
Cryptocurrencies are very likely to exist alongside fiat currencies despite bans and restrictions and will remain in that role when we become a world of fiat cashless economy.
Read: 51 countries have implemented bans on cryptocurrencies
Economic benefits
Blockchain technology has presented a number of different opportunities for Nigerians trying to diversify their income streams and protect themselves from economic downturns, despite poverty, inflation, and unemployment levels at all-time highs, and with COVID-19 as an added threat.
The disruptive technology may lower barriers to financial inclusion in Nigeria, according to Enhancing Financial Innovation & Access (EFInA) which promotes financial inclusion through financial sector development. The report states that Africa’s largest economy could see an increase in its gross domestic product by as much as $29 billion by the end of the decade.
America takes the lead
Nigeria can also learn from the world’s most powerful economy, whose president just signed an executive order requesting that the government examine the risks and benefits of cryptocurrency.
There has been much anticipation surrounding this long-awaited directive, not least due to growing regulatory concerns around the world regarding the nascent digital asset market.
Among the concerns raised in the White House announcement is giving the U.S. a competitive advantage in the field of crypto.
As part of Biden’s business plan, the Department of Commerce has been tasked with “establishing a framework for U.S. leadership and competitiveness in, and use of, digital asset technologies.”.
Regulators in Nigeria should keep in mind that crypto-assets like Bitcoin and XRP have helped disrupt international payments, bringing down costs and speed of reception.
Bottom line
Rather than exclude it from the Nigerian banking ecosystem, the apex bank should engage with it, because the advent of crypto as well as blockchain technology, in general, will disrupt traditional banking, including central banking, in ways that we haven’t yet dreamed of.
Countries like India,America Even Russia didn’t put total ban on Crypto Biz because they see what we don’t see here,Before you can put a total ban on something it needs to be critically looked into.If just two exchanges van be generating over $400M in nigeria now how much do you think 10 Exchanges will be generating and how much Tax are we loosing with that,India as a country just raised there tax and put in structured system in place.. Cbn needs to look at ways to improving the economy and lift the ban because millions of jobs will be generated in that Sector
Govt will be making alot of money via tax and even creating enormous jobs by just lifting d ban..
Nice try but let us keep the status quo
You know our leaders are blind, this CBN guv seem to be walking backwards, have never loved his polices. I told a friend that if we don’t spend real cash and time trying to study the future of this crypto world, it will grow so big and engulf our banks, like it or not crypto is here to stay and it’s the future of transactions. Many guys I know today have far more cash in their binance compared to what they have in banks. That tells us our banks are losing already,
Matter-of-fact: CBN is trying to but can’t stop the use of crypto by Nigerians.
My candid opinion to the authorities should act with sense. They should focus on the advantages and how to mitigate any disadvantages associated with crypto adoption in Nigeria.
If Nigeria/CBN refuses to see beyond the disadvantages of Blockchain/cryptocurrency evolution, the nation will be the ultimate loser, if not now certainly in the future.
Because of our unfortunate economic environment, the diehard, ever active Nigerian youth population especially massively embrace the opportunities of the Blockchain/cryptocurrency world, not surprising with the good, the bad and the ugly. I see all these as normal in the evolution of the ‘new way’ to global exchange/financial enterprise.
The fiat currency is designed for concentration in the hands of few with its goods, bads and uglies.
Cryptocurrency is born out of the need for decentralization of global money systems/exchange with several advantages that place it above fiat currency, including radical revenue generation for governments and individuals who key into the inherent opportunities.
The action of throwing away the child with the bathwater is, to say the least NOT the right thing to do. Rather than a blanket ban, the authorities should find a way around any issues
(real or perceived) surrounding Blockchain/crypto enterprise engagements in Nigeria. Ultimately, banning should be out of it as that amounts to the cutting off Nigeria’s active minds from huge global blockchain opportunities, senseless more so because the government has no better alternatives now or nor are there any indications that there will be any in the future.
If the real fear is the scams/frauds and losses of money associated with some blockchain programs, I dare say that all are temporary and part of the sacrifices and evolution toward learning and developing the system. It is universal as bad elements will always try to infiltrate any good thing coming to the people but we cannot be cowed by such trends/forces. The government, her and the financial players and regulators should focus on cooperating and policies to address such challenges for in the end if done right, it will be a win-win situation for the citizens and the government.
The article is reach enough enlighten the dumb knowledge of Nigeria leaders. Either you like it or not crypto system have come to stay. The CBN GOVERNMENT need to understanding what decentralized ecosystem is‼️ The world is shifting from traditional ways of doing things to digital systems. Ok, the number of employees in a banking system as at year 2000 on a counter is gradually reduce. you don’t need going to bank depositing money into your bank the days,right ? You don’t need third party in decentralized system customer details are share across the Blockchain database which can’t be modified or alter. No denying of transaction. NIGERIAN need to move at the speed of light as tech revolving….think Nigeria Government.
To day na to day
Bitcoin is the exchange of life in Nigerian,and they is no job
CBN is corrupted what happened to the government laundering our money away it’s crypto trading you are talking about, you people get away with our money no body talks stingy gvt
Emefiele, Buhari etc. These are not educated people when it comes to the digital finance. I wonder if Godwin can use an Android phone.
Wisdom demands that you understand a new concept before you do anything about it. That’s what countries with leaders with common sense do. Unfortunately, they gave out all the brains and forgot to reserve any for these so called “Nigerian rulers”. Greed and selfish ingrates!