In February last year, the Central Bank of Nigeria made a massive decision for the future of cryptocurrency in Nigeria, they banned the trading of all cryptocurrencies across the country. CBN had been against crypto from as early as 2017 and decided to impose the ban as more Nigerians moved towards cryptocurrency instead of traditional banking leading to massive implications to the value of the naira-dollar. Given the move globally towards new financial technology and the uptake in cryptocurrencies, like Bitcoin, this could have massive implications for the future of Nigeria’s crypto market.
Impact on the Present Moment
“Bitcoin was the most used crypto in Nigeria and was massively popular, especially amongst younger generations who are using it to try and escape poverty and unemployment. This has led to outcries from stakeholders and traders alike who see this as a potential stifling of Nigeria’s growth and the livelihood of young Nigerians,” says Barbara Rich, a journalist at Write My X and Britstudent.
It is pretty much impossible to enforce a ban on cryptocurrencies given their decentralized nature, so CBN is actually putting controls on the way you can trade these currencies on themselves and financial institutions under their control. Cooperation with applications like Monnify and Paystack are now prevented with these banks meaning that effectively Nigerians cannot buy cryptocurrency through traditional more accessible channels.
The key point, however, is that these regulations affect financial institutions and not the citizens of Nigeria themselves. Therefore, ownership of cryptocurrency is still perfectly legal and while they may struggle to access the market they can still trade on them if they can find the right way to do so.
What Does This Mean for the Future?
Tristan Mead, the finance writer at Australia2write and Research paper help, warns “CBN’s decision does have some impact for the future of Nigeria’s cryptocurrency. It will lead to a setback for many cryptocurrency services that were trying to work in this market that could impact them for years to come.”
While cryptocurrencies aren’t actually criminalized in Nigeria these severe restrictions may have some massive impacts on companies that trade in cryptocurrency in the country as well as the innovation of financial technology and services. However, Peer to Peer (P2P) transactions are likely to see an uptake as they are in no way criminalized by these announcements. This means that we will likely see companies move towards P2P transactions allowing crypto to still thrive in Nigeria.
There could also, however, be an increase in the distrust of cryptocurrency amongst those unfamiliar with the technology before the ban and increase the image of it being a money-laundering scheme for hiding fraud.
Given the likelihood of blockchain technology, the core of crypto, and cryptocurrency becoming of key importance to traditional banking in the future, and its challenges to the current systems. By banning the trade of cryptocurrency through CBN and other financial institutions they are likely setting back their own financial development and preparedness for the future.
There may potentially be an increase in the value of the naira-dollar in the short term through these announcements, however, this may in fact be the worst thing in the long run for the currency as people look to other channels to use crypto outside of the banks.
Cryptocurrency adopters and naysayers alike are going to be looking at countries like Nigeria going forward to see if people do move away from Bitcoin etc. and back to traditional banking. Given that CBN’s announcement did not actually criminalize the use of cryptocurrencies, it is unlikely to actually become much of an issue as people move more towards peer-to-peer transactions, bypassing banks entirely.
The main issues of the Central Bank of Nigeria’s anti-cryptocurrency stance are that it could put the future of cryptocurrency innovation in Nigeria well behind other countries and in fact, leaves the banks unprepared for the challenges that this will present in the future. In the end, it would be better for them to instead look at implementing strong regulation around cryptocurrency to reduce its potential fraudulent uses. If they did so they may in fact become the market leader in applying the regulation to cryptocurrencies and a blueprint for other countries to follow.
Development manager George J. Newton, Write My Essay and Thesis Writing Service, has perfected the art of the apology during his decade-long marriage and brings that diligence to his writing for Nextcoursework.com.