In a sudden announcement on Friday afternoon, the Central Bank of Nigeria banned the trading of cryptocurrencies across the country. Crypto has always been posed as a threat to traditional financial institutions and since the inception of bitcoin regulators have struggled to come to terms with the concept of a currency out of their reach. Why has CBN chosen to take on crypto now – and what does this mean for Nigerian users of these currencies? Let’s explore the fallout.
Central Bank of Nigeria Bans Crypto
On the 5th of February 2021, the Central Bank of Nigeria issued a circular stating that financial institutions in Nigeria would no longer allow the trading of cryptocurrencies. Further, these institutions were informed of their new obligation to identify organizations and individuals trading in crypto, and to close these accounts. Although this action took many by surprise, CBN has been threatening crypto for some time – and it has backed up its new decree with strong regulatory enforcement on agencies that don’t cooperate.
How Has CBN Banned Crypto?
Because cryptocurrencies are decentralized that makes it difficult for institutions to enforce a ban on the trading of them. It remains the fact that bitcoin and other cryptocurrencies are prided for being above regulation and traditional attempts by central banking networks to ban the trade of these currencies have been met with scorn from the crypto communities.
Nevertheless, CBN has flexed its muscle on how Nigerians can buy and sell cryptocurrencies. The country’s financial network will now be strongly incentivized to prevent anyone trading in crypto – crypto platforms such as Monnify and Paystack have traditionally been partnered with the financial institutions of Nigeria to enable citizens to purchase crypto through debit card transactions. CBN prevents the cooperation of these entities and will effectively prevent access to cryptocurrencies throughout Nigeria.
Why Has Crypto Been Banned?
CBN’s publications offer no reasoning behind the ban on cryptocurrency and the institution’s logic is predictably opaque. Why has CBN chosen to ban cryptocurrency – why now, and will this ban be permanent?
In fact, CBN has positioned itself in opposition to cryptocurrencies since as early as 2017 – and in its missives, it claims to be merely enacting policies that have existed since that time. “One reason why CBN may have chosen this moment to attack cryptocurrency in Nigeria is because of the falling exchange rate of the naira-dollar, and the political implications of the weak currency,” says Charleen Sweeney, a blockchain expert at 1 Day 2 write and Write My X. “Nigerians, dissatisfied with the state of traditional banking, have been turning to cryptocurrency and CBN is trying to turn the tide in defense of its currency.”
The Impact On Nigerians
Crucially, the announcement from CBN doesn’t criminalize the ownership of cryptocurrencies by Nigerians. The regulations apply not to citizens of Nigeria, but to the financial institutions under the control of CBN. Whilst it may be more challenging for Nigerians to access crypto from now on, they’re still welcome to tap into crypto markets if they find the right channels.
The Future Of Crypto In Nigeria
Whilst trading platforms are now prevented from working with Nigeria’s financial institutions, there’s still a way for Nigerians to access crypto. P2P markets have always been a significant method of exchanging cryptocurrencies and peer to peer transactions for cryptocurrency are in no way criminalized by the announcements.
“Nigeria has always had a large share of the P2P cryptos market, in fact, it’s the second largest market after the United States,” says Andrew McMonaghan, a tech blogger at Origin Writings and Brit Student “Thanks to this infrastructure, Nigerians will still be able to get their hands on bitcoin. Provided that these purchases are sufficiently hidden from financial institutions, crypto will still thrive in Nigeria.”
Platforms such as Remitano and Paxful, as well as Buycoins, offer P2P trading to Nigerians. It’s likely that P2P transactions will surge under these new rules and savvy Nigerians will have no trouble accessing cryptocurrencies.
Conclusion
Crypto has been banned – for now. We’ve seen financial institutions raise their might against cryptocurrencies before, however, and the innovative crypto market always survives. Nigerians may have to change the way they operate around cryptocurrencies for the time being, but we can be sure that crypto isn’t going anywhere other than underground.
About Author:
George J. Newton is the African continent correspondent at Write my coursework and PhD Kingdom. He studied journalism in Johannesburg and currently lives in Nairobi with his wife and daughter. His further work can be found at Custom Coursework.
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