It's been more than a year since the Central Bank of Nigeria (CBN) published a circular forbidding cryptocurrency transactions and facilitating payments for crypto exchanges to banks and other financial institutions.
Nigerian banks are not allowed to serve consumers that deal in cryptocurrency.
Banks quickly cooperated with the law and shut off the accounts of bitcoin exchange businesses and private users in response to the approaching prospect of hefty fines. At the time, the CBN's decision was not ill-advised.
Despite the CBN's restriction, crypto usage is increasing in Nigeria.
With Africa's largest country suffering rising economic troubles, more and more young people are turning to cryptocurrency to hedge against currency depreciation, transfer money cheaply, or earn a living, despite the fact that banks have banned it.
Nigeria still has the lion's share of peer-to-peer transactions in Africa. On two main platforms (Paxful and Localbitcoins), Nigeria now has a P2P volume of $400 million, followed by Kenya with more than $160 million and South Africa with $117 million.
Crypto groups have developed ways to circumvent government limitations in a number of countries, including Nigeria. According to an annual analysis on crypto adoption in 154 countries, Nigeria ranked sixth in 2021, part of a wave that saw the value of crypto traded in Africa increase by 1,200 percent.
Despite the government crackdown in early 2021, Africa's largest crypto market reacted by moving to peer-to-peer platforms like Paxful and Binance, making it more difficult for the government to monitor and control such activity.
The rules are evolving.
Furthermore, the CBN's justification for enforcing the restriction is tainted by the misconception that crypto is anonymous when used.
Local centralized exchanges have gotten ahead of the game by requiring users to follow stringent anti-money laundering and know-your-customer regulations.
Because users provide extensive personal information, every transaction is immediately correlated with a user, especially at the entry and departure points to the centralized crypto system.
Because users provide extensive personal information, every transaction is immediately correlated with a user, especially at the entry and departure points to the centralized crypto system.
If you are a person of interest, it is nearly impossible to get away with fraud and other crimes aided through exchanges since these exchanges use incredibly advanced blockchain surveillance systems. Even in the regulated financial system, those venues are likely to have less traceability.
While the CBN appears to be on the right track in building the eNaira by cooperating with Bitt Inc., convincing the general public to transition from crypto to e-Naira has been difficult.
Despite bans and restrictions, cryptocurrency is quite likely to coexist with fiat currencies and will continue to do so when we go to a fiat cashless economy.
Economic advantage.
Despite poverty, inflation, and unemployment levels at all-time highs, and with COVID-19 as an extra threat, blockchain technology has given a variety of alternative opportunities for Nigerians trying to diversify their revenue sources and protect themselves from economic downturns.
According to Enhancing Financial Innovation & Access (EFInA), which promotes financial inclusion through financial sector development, disruptive technology may lessen obstacles to financial inclusion in Nigeria. According to the analysis, Africa's largest economy might see a $29 billion rise in gross domestic product by the end of the decade.
The United States takes the lead.
Nigeria may also learn from the world's most powerful economy, whose president just signed an executive order directing the government to investigate the risks and benefits of Bitcoin.
This long-awaited order has sparked a lot of excitement, not least because of mounting regulatory worries around the world about the embryonic digital asset market.
Giving the United States a competitive advantage in the realm of crypto is one of the issues stated in the White House announcement.
The Department of Commerce has been tasked with "creating a framework for U.S. leadership and competitiveness in, and utilization of, digital asset technologies" as part of Biden's business plan.
Regulators in Nigeria should remember that crypto-assets such as Bitcoin and XRP have aided in the disruption of international payments by lowering costs and speeding up receipt.
In conclusion.
Rather than excluding it from the Nigerian banking environment, the central bank should embrace it, because crypto and blockchain technology in general will disrupt traditional banking, including central banking, in ways we haven't yet imagined.
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Images Credited to Google Image search.
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