The Central Bank of Nigeria (CBN)’s directive halting all transactions involving cryptocurrencies has done little to dampen the enthusiasm of Bitcoin operators and stall their activities.
Instead, it has continued to pique the interest of many Nigerians, especially youths, and triggered a surge in the number of its operators.
But beyond the harvest of new entrants into what analysts say is the country’s “fastest trade platform” that has “outperformed all its financial assets,” the business has continued to generate hundreds of thousands in hard currency since the directive was released early February.
Cryptocurrency is a digital asset designed to work as a medium of exchange where individual coin ownership records are stored in a ledger existing in a form of computerised database.
The most popular cryptocurrency transacted in Nigeria is Bitcoin, but others like Dogecoin and Ethereum are also dominant while more cryptocurrencies continue to be created.
Nigeria’s apex bank had issued a circular warning banks and financial institutions that “facilitating payments for cryptocurrency exchanges is prohibited,” while instructing them to identify individuals or entities that transact in cryptocurrency or operate cryptocurrency exchanges and close their accounts.
The directive elicited varied reactions from the Nigerian public with many expressing concern about the potential negative effect it could have on the country’s growing cryptocurrency market and innovation in financial technology.
Many viewed the action as an outright ban on crypto activities until the bank came up with a clarification days later over what it said was a “misrepresentation”.
The CBN’s Deputy Governor, Adamu Lamtek, said the bank did not ban cryptocurrencies but only prohibited transactions in them in the Nigerian banking sector.
Observers feared the directive could hurt crypto activities and put operators out of work.
However, the directive did impact on crypto transactions as exchanges such as Binance were affected because payment partners that store the naira are no longer willing to deal in them, putting an indefinite pause on naira deposits to exchanges.
But the impact was not marginal and drastic as anticipated.
Why CBN can’t stop us – Expert
“It was no big deal,” a cryptocurrency operator, Stanley Okwu, told 21st CENTURY CHRONICLE in a telephone interview dismissively, and vowed that, “That can’t slow us down.”
“Crypto is unstoppable,” Okwu boasted, adding that, “You can’t stop what you don’t see.”
Events of the last three months show that Okwu was not just “blowing hot air” as operators turned to alternatives to up the ante.
“We can just eliminate the third party by concentrating on the Peer-to-Peer (P2P) alternative. Bitcoin is P2P, meaning that it can be transacted without intermediaries. Your bank may be able to shut down your account but no one can shut down your Bitcoin wallet,” he explained.
It is was further learnt that platforms such as Paxful and a Binance’s P2P platform help connect users so that they can coordinate their transactions.
Data obtained by our correspondent show that Nigerians moved about $103m worth of Bitcoins on P2P channels alone since the CBN’s directive came into effect with trading surging by 27 per cent.
Analysts said Nigeria as Africa’s largest crypto market would not be hampered by the stance of the country’s top banking regulator.
21ST CENTURY CHRONICLE further reports that Nigeria ranked third after the US and Russia in 2020, generating more than $400m worth of transactions.
Amid rising inflation and vice grip by the apex bank on the country’s financial system, crypto activities have continued to thrive, providing easy alternatives and viable options.
The borderless feature of Bitcoin also makes payment effortless for Nigerians in addition to offering low transaction fees.
Why CBN is uncomfortable
21ST CENTURY CHRONICLE reports that this is not the first time the apex bank would wield the big stick on the matter.
It issued a similar directive in 2017 stopping banks from facilitating cryptocurrency-related transactions, but the ban remained largely unenforced.
Experts believe that the uncertainty surrounding the financial product which makes it a high-risk investment informed the apex bank’s decision.
An economist and financial expert, Simon Samson Galadima, and Mathew Ogagavworia, a forensic accountant and chartered stockbroker, said the government saw crypto activities as fraudulent which informed the cold shoulder treatment it was giving its operators.
Galadima explained that, “The CBN and other monetary authorities reject cryptocurrency because they believe it is used for money laundering, as well as other criminal activities.
“What’s more, it thinks cryptos cannot be regulated or controlled. Consequently, its ban within the Nigerian monetary and financial space.”
Ogagavworia on his part questioned the sustainability of the crypto business model, noting that its value was artificially defined in a manner that was most suspicious and unreliable.
Okwu agreed that the fraud fear was justified, especially that there existed many shady investment deals online, but noted that if the regulatory authority took time to study crypto operations, it would give it legitimacy.
Okwu explained that, “Our activities are legit and they have an internal regulatory mechanism, and checks and balances are involved.”
What needs to be done
Galadima advocates that, “Cryptocurrency is better regulated like the Government of Ghana is trying to do. It’s better than outright ban as is being done by the CBN.
“Take South Africa for example, it takes cryptocurrency as a taxable asset. It derives tax revenue from it. Nigeria with one of the lowest tax-to-GDP ratios in the world should have taken a leaf out of the South African book.”
Okwu suggested that, “Every new technology needs to be studied, and that is what the Nigerian government should be doing.
“I believe the financial sector should seek the expertise of companies like Cardano, owned by IOHK USA, founded by Charles Hoskinson, to help them in implementing blockchain technologies usage for growth.”
