Business Insight

CBN Bans Cryptocurrency In Nigeria Amidst Massive Growth

We are in the year 2021 and people around the world are turning to cryptocurrencies such as bitcoin. Soaring values and the backing of super-rich investors are things that make the digital currency more attractive.

Online searches for bitcoin, ethereum, and dogecoin have been on the increase, pushing aside the usual focus of interest in stock markets and safe-haven investments in gold and property.

Just last week, Tesla bought $1.5bn in bitcoin which propelled the currency to a high of almost $43,500. It has since increased again to almost $48,000 before falling back on Tuesday to $46,250, an increase of more than 300% since February last year.

While all these are going on across the world, on Friday, 5th of February, 2021, the Central Bank of Nigeria (CBN) sent yet another shock wave to Nigerians with a sudden regulation that prevents us from buying cryptocurrency using Nigerian bank accounts.

Nigeria which has been reported to be the world’s second-largest Bitcoin trading country over the last 5 years, will likely be missing in action due to this new CBN regulation.

What is the Implication of CBN Banning Crypto?

The anonymity of bitcoin and other cryptocurrencies makes it somewhat above regulation. However, the CBN regulation has restricted how people can buy and sell cryptocurrencies in Nigeria.This CBN regulation prevents all regulated bodies under it from dealing in cryptocurrencies or even facilitating payments for crypto exchanges.

1. The CBN went a step further to ask all regulated bodies under it to identify persons or entities transacting in crypto within their systems and close their accounts.

2. In essence, the CBN is attempting to cut off the oxygen going to crypto platforms.

Why did CBN ban crypto in Nigeria?

Update: The Governor, Central Bank of Nigeria (CBN), Mr. Godwin Emefiele says the Bank’s decision to prohibit deposit money banks, non-banking institutions and Other Financial Institutions from facilitating trading and dealings in cryptocurrency is in the best interest of Nigerian depositors and the country’s financial system. According to the CBN governor: “Cryptocurrency has no place in our monetary system at this time and cryptocurrency transactions should not be carried out through the Nigerian banking system”

There is no official statement by the CBN declaring the reason for the new regulation. However, we drew a hint is in the second paragraph of the CBN circular where it says “…the Bank (CBN) hereby wishes to remind regulated institutions that dealing in cryptocurrencies or facilitating payments for crypto exchanges is prohibited”

Going by the above sentence, we can point to a January 2017 circular released by the CBN where it forbade regulated institutions from transacting in virtual currencies in any way.

Conclusion

In Nigeria, the normal reaction when a regulator pass downs stringent rules is to obey first and negotiate later. 

That been said, the key thing for startups dealing in Cryptocurrencies is to move their funds from their banking partners in Nigeria and to initiate some quick thinking about the possibility like peer to peer transactions, where two users connect directly to each other to trade cryptocurrency.

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