Friday, March 19, 2021 / 11:00AM / OpEd by Adeagbo Adedolapo M. / Header Image Credit: mediaafrica.co
Nigeria, the largest Bitcoin market in Africa and also the second-highest Bitcoin market volume has experienced astronomical growth in the adoption of BTC in recent years. A lot of people in the country now want to invest in digital assets and buy Bitcoin and other cryptocurrencies. Many people in the country buy bitcoin via direct bank payments or P2P.
However, last month, Nigeria's Central Bank released a statement banning financial institutions from involving in transactions related to cryptocurrencies. This includes the buying and trading of digital assets via banks.
The ban imposed by the Central Bank of Nigeria (CBN) stated that banks and other financial institutions should close the bank accounts of persons involved in digital asset transactions with immediate effect. It also announced that banks that go against the circular will face serious regulatory actions. The ban also prohibits banks from engaging in digital assets and processing remittances for cryptocurrency exchanges. Crypto exchanges collaborate with payment firms such as Paystack and Flutterwave to deal with bank clients in Nigeria. This collaboration allows cryptocurrency trading firms to facilitate debit cards and direct bank transfer transactions. According to the statement released, those firms have been restricted from processing such transactions.
The restriction by the CBN has caused an unpleasant surprise amongst many which include those in the cryptocurrency sector. They claimed that they were not informed before the announcement of the ban. Whilst a lot of people anticipated some kind of regulatory laws later, the abrupt ban has seriously shaken the sector.
Several reasons have contributed to the astronomical growth of BTC adoption in Nigeria. One of the main factors is the strict foreign exchange laws by the CBN. Additionally, the Naira's decline has increased the interest of Nigerians in Bitcoin.
With the strict FX laws, Nigerians have turned to alternate currencies because of the scarcity of dollars which is a result of the strict banking regulations. This has made Bitcoin adoption in Nigeria increase tremendously due to the decreasing confidence in the nation's fiat currency and rise in inflation.
The Bitcoin market in Nigeria has seen a 19% annual increase in the last three years (2017 - 2020), whilst it recorded its largest trading quantity of 29,504 Bitcoin last year. The Bitcoin market saw an increase of 30% within the lockdown, while it recorded its largest trade volume during the peak of the lockdown.
With naira experiencing mixed exchange rates, it has resulted in the currency being unstable. Due to this, the CBN has decided to put in measures to protect the country's currency and control the supply of FX.
Notable exchanges such as Remitano and Binance are top P2P cryptocurrency trading firms that allow Nigerians to buy Bitcoin and also sell their BTC and other crypto assets with their debit card. This feature has made it easy for Nigerians to buy BTC and also increase the adoption of Bitcoin. However, with the latest circular released by the Central Bank of Nigeria, this is about to change.
People believe that the ban is related to last year's End SARS protests. The protest funds were donated via Bitcoin and other cryptocurrencies after the government restricted bank accounts that were related to the protest. The Nigerian authorities also think that digital assets could be utilized to finance terrorism.
Although the ban by CBN does not illegalize buying of BTC and other digital assets, it will prohibit Nigerians from utilizing their debit cards to directly purchase BTC and other digital assets. This will make it more strenuous for Nigerians to buy Bitcoin and also sell.
The indigenous cryptocurrency sector, which happens to be one of the largest in the African continent, will also be affected and will be seriously scrutinized following the ban. After recording huge successes last year, the indigenous digital asset start-ups were predicted to record much greater success. Possible investments and acquisitions were forecasted earlier this year. However, with the current restriction placed by the CBN, such plans and predictions will be paused presently as the cryptocurrency startups fight the skepticism of the latest regulation.
With Nigeria being one of the major players in the cryptocurrency market in Africa, the restriction of financial institutions from processing digital assets-related transactions by the CBN might influence other countries in the continent to also taking the same measures. Several countries in the continent do not see digital assets as legal tender due to the difficulty in regulating digital assets, this includes Ghana and Kenya.
Following the restriction by CBN, a lot of countries where there's high adoption of Bitcoin such as South Africa are most likely looking at the latest development in Nigeria. Very soon, the central banks of other African countries with high Bitcoin trades could probably take similar steps.
To avoid being defrauded, you must make use of trusted and safe P2P platforms, one of which is Remitano. The P2P feature of Remitano allows you to buy BTC and also sell your Bitcoin safely and securely.
Did you know that the price of Bitcoin is predicted to get to about $100,000 due to institutional adoption? Find out the top 10 institutional bitcoin investors in 2021.
*Adeagbo Adedolapo M. is a content writer and digital marketer with several years of experience in the cryptocurrency space.