On February 5, 2021, the Central Bank of Nigeria (CBN) announced to deposit money banks (DMBs), non-bank financial institutions, other financial institutions and the general public a ban on accounts that trade payments and exchanges. that involve cryptocurrencies.
According to the circular, the reason was largely due to the risks associated with such transactions, hence the order to immediately close customer accounts used in cryptocurrency trading in Nigeria.
This new regulation came as a complete shock to many Nigerians; particularly as the cryptocurrency has gained considerable acceptance among young Nigerians over the years, in the face of the staggering inflationary local fiat currency of the naira and its plummeting value on the parallel foreign exchange (forex) market. In fact, according to a recent statement from a cryptocurrency exchange, Paxful, Nigeria is currently ranked as the second largest Bitcoin in the world by trading volume. According to a report by QZ Africa, Nigerians have traded 60,215 Bitcoins or more than $566 million in five years.
Following the above, there is great potential in the Nigerian financial market with crypto as a major unit of trading. In 2020, many major fundraising campaigns, large foreign remittance funds, and cross-border payments were made in Bitcoins. One of which was promoted by the Feminist Coalition in 2020. Through the crypto currency, this women’s rights advocacy group was able to gather donations from around the world for the #EndSARS protest using BTC Pay, despite CBN closed the Nigerian bank accounts associated with the movement. . If this isn’t changing the financial narrative, challenging traditional banking services, and decentralizing monetary systems, then what is?
As most crypto wallets and trading accounts are predominantly owned by young Nigerians, it is essentially hard to separate from them the economic implications of CBN’s crypto ban directive. In general, they constitute the main actors and beneficiaries of the commercial industry. And consequently, they will bear the brunt, as many young people have become increasingly aware of the benefits of trading cryptocurrencies as a way to invest their funds in assets and also to ensure financial stability. Even despite its attendant somewhat volatile values and unpredictable rise or fall in prices.
Analyzing this policy from a critical perspective, the question must arise as to whether it was intended for the correct purpose or not. In 2017, CBN issued a circular warning Nigerians against using digital currencies, stating that such currencies were used to finance terrorism and launder money. That was before the bank warned again that transactions in the coins could not be tracked by a central network base, making them susceptible to abuse by criminals and fraudsters in 2018, claiming they were not legal tender. in nigeria.
Yes, that’s understandable. But what our central bank needs to know is that cryptocurrencies are almost the same as fiat currencies, although without relying on a banking system. And it shouldn’t be related to ponzi schemes at all. It is a legitimate currency and widely adopted by higher income countries and large economies, even some companies are now considering paying salaries in $BTC. It is also essential for equitable participation in the global economy and boosting financial inclusion in the long term. More than anything, it just seeks to transform the conventional financial system with innovative and efficient solutions that are essential to bring finance, investment, transactions and exchanges across borders. And also close the wide existing gaps in the financial markets and shape the digital future of money with blockchain technology. It may pose serious challenges for the main bank, but at least not now.
In any case, instead of making cryptocurrency transactions and transactions no longer possible on third-party platforms to counter anonymity, CBN can take advantage of the National Identification Number (NIN) and Bank Verification Number (BVN). This will make it easier for merchants and users to verify their identity before they can process transactions and deals on the Nigeria-based platforms. In addition, they can have a report of cryptocurrency inflow and transactions from miners that are platforms and financial institutions and have them comply with strict cybersecurity procedures to ensure transparency and legitimacy of transactions. This will go a long way to reduce financial payments in the form of fraud, ransom and black market sales.
Said that. We are in the digital age that has created several new career paths for young Nigerians and other millennials around the world. We now have a generation called ‘Gen Z’ who are well used to new waves of technology, particularly blockchain, and who are actively exploring the concept of Internet entrepreneurship. In fact, cryptocurrency trading has become a high-income and in-demand skill of the new digital economy over time. Our youth earn income through peer-to-peer transactions and run blockchain companies. Therefore, cryptocurrency trading, investing in crypto assets and storing values have since become a source of livelihood for them. And without a doubt, this has contributed immensely to the exponential growth of the blockchain ecosystem in Africa. And, more particularly, making Nigeria the central and strategic hotbed of cryptocurrency trading on the continent.
While Binance, the world’s largest Bitcoin exchange, has temporarily suspended Nigerian Naira deposits, we can only hope that the situation will improve soon and that CBN will review the cryptocurrency ban and its financial policies in this regard to adapt to the market. emerging financial system, and as such make regulation beneficial to all.
Without a doubt, the Nigerian youth have shown that cryptocurrency trading and blockchain adoption among other forms of digital investments have not only arrived but are here to stay and will continue to be a financial lifeline used to achieve various patriotic goals. and social impact missions to improve the socioeconomic life of themselves and their communities. It is already the future. And crypto is right here and will be in the mainstream soon.
Agbaje Ayomide is co-founder of Upskill Writing.