On February 5, the banking regulatory body, Central Bank of Nigeria (CBN), issued a memo to banks in Nigeria banning transactions in cryptocurrency.
The announcement came as a shocker to individuals who have come to depend on trade in cryptocurrencies such as Bitcoin for meeting their daily transaction needs. Within hours, cryptocurrency exchange platforms began to disengage their services which offered seamless funding of bank accounts with Nigerian banks.
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Due to the increased trade in cryptocurrencies, Nigerians abroad had been able to find innovative ways to send money back home consequent upon the bottlenecks created by the CBN in preventing seamless remittance from the Nigerian diaspora. It was reported that diaspora remittance fell from $23 billion in 2019 to about $9 billion in 2020 largely because the CBN could not track inflows via cryptocurrencies. This was part of the reasons Nigeria became the second-largest traders in cryptocurrencies by volume in the world, after the United States.
It is also interesting to note that the other ultimate investment regulatory body in the country, the Security and Exchange Commission (SEC), recognises cryptocurrencies as assets and accords it the proper respect it is gaining worldwide.
Meanwhile, as this announcement may have been taken by other Nigerians who depend and spend the Nigerian Naira for their daily transactions, it has greatly affected so many other Nigerians who are financially literate and technologically savvy. Many of these crops of Nigerians who trade in cryptocurrencies have found a use for them with paying for goods abroad rather than the dollar, for the remittance of funds from Nigerians in the diaspora, and for usual capital gained from speculation in the cryptocurrency market.
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Cryptocurrency trading has offered a lot of those who engage a level of freedom which the traditional financial industry has prevented them from participating in. It is not unusual to find a lot of youth engaging in cryptocurrency (crypto) trades nowadays from the comfort of their phones and laptops. The market is fast getting decentralised that a body such as CBN wanted to put a lid on the operations of the crypto market.
But as it is wont of certain things whose time to fester is inevitable, innovation will always find its level just like water. The CBN memo banning crypto settlements via banks has forced many traders in that realm to stick with the option of Person-to-Person (P2P) of transactions involving currencies such as Bitcoin, Ethereum and others. The banks have been circumvented and the CBN no longer have oversight of the kind of funds running through bank accounts in Nigeria since users have now resolved to settle each other through guaranteed P2P platforms created by cryptocurrency exchanges.
In essence, the CBN and the Federal government may just have encouraged more people to engage in untraceable transactions after the exposure given crypto by the ban.
In the same week that the CBN banned the settlement of cryptocurrencies, bitcoin and many other of these currencies soared to an all-time high as it was revealed Elon Musk the world’s richest man, recently directed Tesla Motors to invest $1.5 billion of its balance sheet in bitcoin.
The age of the cryptocurrency competing with the Naira in importance has begun, and the rate at which Nigerian will accept P2P payments will experience a climb going forward- all because the CBN is determined to overregulate the banking sector.
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