Collaboration is the best approach to regulating cryptocurrencies in Nigeria – Owen Odia

Owenize Odia, Country Manager, Luno Nigeria in this interview with BusinessDay’s Frank Eleanya shares a recent survey conducted by the company that looks at the impact of the COVID-19 pandemic on the global financial system and how it has influenced growth in the adoption of cryptocurrencies in many countries including Nigeria. She also reviews the growing interest of regulators in Nigeria to finally create a regulatory framework to build investors’ confidence and protect consumers in the market.

Luno recently released a report on the awareness of the currency space in Nigeria and other countries. You had a similar survey in 2019. Tell us what has changed in the space of one year?

The 2020 report is a repeat study of what we did in 2019. However, this particular survey focuses on people’s perceptions, particularly if the trust and uncertainty have changed considering the pandemic. The study looks at the impact of COVID-19 on the economy and the outlook. This was a global survey that shows that people feel more secure and the trust in their government has increased. When the COVID-19 happened a lot of government carried out stimulus packages such as pumping money into the system. This helped increase trust in some countries about the governments.

Bringing it back home, 52 percent of Nigerians feel the economy is performing poorly. This was not peculiar to Nigeria as globally the GDP rate has dropped. Every economy was affected. The survey reflects what is expected and what is happening. The unemployment rate has increased and a lot of industries were shut down. Essentially, there was a major shift in all parts of the economy. The survey also shows that 44 percent of Nigerians believe that within 12 months the value of the currency will decrease and this will affect the purchasing power of individuals.

It is no surprise that cryptocurrencies get a lot of attention in Nigerian. The survey reflects that a lot of Nigerians are tech-savvy because we have a huge population of youths. That is why you have this large number of them adopting it because they understand what it is. They have seen used cases and the fact that many people are beginning to talk about it, and institutional investors trying to get a chunk of this crypto-economy accounts for their increasing interest.

Does the survey capture the number of people who say they know what cryptocurrencies are?

There is a difference between hearing about cryptocurrency and knowing what it is. As of 2017 many people in Nigeria had not heard about bitcoin. But the narrative has changed. Three in five Nigerians have heard about cryptocurrency and within those five at least one person owns it or has come across it. At Luno we realise that cryptocurrencies are still very new to a lot of people – it is barely ten years old. So we think that education is very key. It is important for us that anyone coming into that space do so from an informed perspective. That is why we are focused on education.

Before the COVID-19 we were doing training where we focused on the geopolitical zones in Nigeria. We had training in Edo State, Rivers State, Abuja, Enugu, etc because there are already cryptocurrency communities in these places but there is not much on education. We had to do education crypto 101, telling them about the basics. Our vision is to upgrade to at least a billion people by 2030 and we cannot do that without educating these people. We have a very resourceful blog where you can learn about cryptocurrencies.

Institutional adoption is growing globally, has that been the case here in Nigeria?

Yes, you can say that. I get a lot of inquiries from companies that are thinking of investing because they believe it is a very viable market. However, a lot of people are still reluctant because of the regulator’s position. There has been an improvement with the SEC’s statement saying that they are going to look into coming up with a framework for cryptocurrencies. There is still a lot of work to do. I am beginning to sense some institutions playing in this space.

What is the trend with Nigerians in diaspora sending money home, has there been a spike in the interest in using cryptocurrencies?

Cryptocurrencies have a very unique case such that it can be used for remittances. With the COVID-19 pandemic, a lot of people lost their jobs, and the unemployment rate in Nigeria spiked. This means a lot of money is being sent from abroad to support those at home. The reason remittance is big in the cryptocurrency space is that using the traditional payment system takes many processes before it gets to the final recipient. However, cryptocurrencies are almost instant and it is just from one person to another and you do not have to wait for days. This is not the same as the traditional channels.

We did not focus on remittances for this particular survey but we have seen a spike. Our signups have increased over 250% within the first and second quarter of 2020 and transactions doubled.

In terms of regulation, do you get concerns that there might be an overlap of regulatory policies given that many government agencies (NITDA, SEC, CBN, Ministry of Finance) are beginning to look at the cryptocurrency and blockchain space?

I can’t really speak for regulators in Nigeria but I know that the CBN came up with a circular three years ago warning financial institutions against using customers funds to trade in cryptocurrencies and ensure due diligence is carried out on exchanges/platform providers, In September, the Securities and Exchange Commission also stated their position, that they will be responsible for regulating cryptocurrencies when the character of the investments qualifies as securities transactions.

For this, I would like to commend the SEC on the work they are doing to put a regulatory framework in place. We have to acknowledge that regulators don’t have an easy task. They have to get to grips with a new technology that very few yet understand and they must do all of this without stifling innovation. We recommend regulators focussing on regulating players rather than cryptocurrency and this is more effective.

I believe effective regulation requires a collaborative and phased approach, with regulators acknowledging the benefits of gathering learning and working alongside industry stakeholders. An example of this is the strides made by the SEC in Malaysia who worked with the likes of Luno to develop a framework that is in effect today. We worked closely with the Securities Commission to deepen their understanding of the cryptocurrency industry and became the first registered crypto exchange in Malaysia.

What is your advice for new investors who are trying to get into the market because of the recent bull run?

Bitcoin is becoming prominent so it is only normal for many people to want to be a part of it. But I believe you should make a smart approach.

It’s important you learn more about cryptocurrencies by researching, Luno is focused on Education, we understand that it’s a new technology and we expect any investor trying to get into the space to come in from an informed perspective. Bitcoin has many use cases, in other words, it uses a span above what the price in the market is. It is an asset to have.