Cryptocurrency is growing worldwide and many countries are moving to accept digital currency. While the US ranks number one in trading cryptocurrency, Nigeria is in the second position. There are several crypto ATMs and exchanges in Nigeria. People have shown tremendous support for the crypto coins and have adapted it truly.
However, the government of Nigeria and central bank authorities have been quite repellent. Since the launch of crypto in Nigeria, it has been a bumpy ride. At points, the government shows no response to the use of crypto and on the other hand, the government takes action against those who trade it. There is no permanent regulation for the currency that is why the growth of cryptocurrency is facing a threat in Nigeria.
Recent Events
Recently, on 5th February 2021, the Central Bank of Nigeria (CBN) passed new laws for cryptocurrency. The letter was released to banks and other financial institutions and it stated that all dealing in cryptocurrency were to be banned.
CBN further clarified accounts should be closed off all those people who were operating in cryptocurrency exchanges or who were trading cryptocurrency. In short, strict measures were to be taken against those who continued the use of cryptocurrency by any means.
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The reason given by CBN to take such drastic and harsh measures was that the public was being affected by the negative effects of the currency. The letter said that cryptocurrency was having a potentially negative effect on the growth of Nigeria’s national currency Naira.
Reasons for Banning
CBN also issued a press release for this on 7th February 2021, to address the issues of cryptocurrency and explain the new regulations. The most highlighted reason for not supporting the growth of cryptocurrency in Nigeria is that the CBN believes it is not a legal currency.
CBN stated that the currency is issued by unregulated and unlicensed entities so it is not a legal tender. The anonymity of digital currency also stands as an issue. The legal authorities state that the lack of KYC makes it easy for criminals to use it for illegal means such as financing terrorist and money laundering.
Lastly, CBN stated the fact that cryptocurrency is very volatile which it believes is a threat to the financial stability of the country.
What Can be done?
Nigeria is ranking at the second position for the use of cryptocurrency and it is not easy to hold back its use. Since the press release of CBN, the trading of crypto has been affected in Nigeria because people cannot buy and sell the currency with their debit/credit card as it is banned.
However, exchanges found a way to overcome this law as well because they switched to peer-to-peer trading. It enables people to buy and sell from individuals rather than exchange. Although there are legal and financial authorities taking measures to ensure that the growth of cryptocurrency stops but it is unlikely to happen. There are platforms like news spy that can benefit from spreading the news about cryptocurrency and help you earn a profit.
CBN is developing strategies to hinder peer-to-peer trading as well by finding and deactivating such accounts. It is also not clear yet if the people who get deactivated will be able to open new accounts again or not. Thus, CBN is working hard to ensure that Nigerians can be kept away from cryptocurrency.
Conclusion:
When a country becomes such a passionate user of cryptocurrency, it is hard to stop them but, the financial authorities of Nigeria are not planning to leave any loopholes. The hurdles that these authorities are building in the use of cryptocurrency is hindering its growth in the country.
