Today, February 5, 2022 makes it exactly one year since the Central Bank of Nigeria (CBN) released a circular addressed to banks and other financial institutions with the directive that transactions in cryptocurrencies and facilitating payment for cryptocurrency exchanges were prohibited.
The CBN had further instructed all banks and other financial institutions to identify individuals or entities that transact in cryptocurrency or operate cryptocurrency exchanges and close their accounts.
That CBN letter elicited varied reactions from the Nigerian public with many expressing concern about the potential negative effect it could have on the country’s growing cryptocurrency market and innovation in financial technology. I believe I was one of the most vocal voices of reason calling for a better approach to the impasse between the apex financial institution and stakeholders of cryptocurrency in Nigeria.
Unbeknownst to the body, it actually drove awareness and subsequent penetration of cryptocurrency in Nigeria with its action. For one, the memo created interest in some Nigerians who were hitherto unaware of the existence or workings of cryptocurrencies. This also pushed its adoption as Nigeria became the biggest country with the adoption of cryptocurrency-Bitcoin- worldwide, second only to the United states, generating more than 400 million dollars’ worth of transactions.
At the onset of the embargo placed by the CBN, I had advised the CBN to revisit the ban on cryptocurrency transactions and see digital currencies as another tool for economic growth. In fact, I challenged the CBN Governor, Godwin Emefiele to a debate on the subject matter, a gauntlet he never picked. Towing my line of reasoning, The Nigeria Economic Summit Group (NESG) also advised the CBN to carry out a comprehensive study on the workings of cryptocurrencies to check its excesses.
Interestingly too, Vice President Yemi Osinbajo, speaking at a recent CBN Bankers’ Committee Economic Summit, called for the regulation of cryptocurrency transactions in Nigeria rather than an outright ban.
Osinbajo urged the apex bank to develop a robust regulatory system to check such transactions. “Rather than adopt a policy that prohibits cryptocurrency operations in the Nigerian banking sector, we must act with knowledge and not fear and develop a robust regulatory regime that is thoughtful and knowledge-based. There is no question that blockchain technology generally and cryptocurrencies, in particular, will in the coming years challenge traditional banking, including Central banking, in ways that we cannot yet imagine. We need to be prepared for that seismic shift. And it may come sooner than later,” he warned.
With all these warnings, it appeared that the CBN was set in its way, going ahead to introduce the e-Naira…something that could best be described as dead on arrival. A white elephant project that appears to be completely snubbed by Nigerians, the discussion on the e-Naira and its ramification to the growth of cryptocurrencies in Nigeria is a topic for another day.
I believe that the conversation on regulating cryptocurrency in Nigeria is not a foregone one as there is still time for the CBN to reverse its obnoxious stance on it. I reached out to the Nigerian Senate last year, urging them to tour the part of their counterparts in the U.S to investigate cryptocurrency and why it is thriving in Nigeria.
Nigeria’s advantage in leading the adoption of cryptocurrency in the world should be an obvious pointer to the fact that no matter how it is being stifled, its trajectory can only be upward and forward. The sooner this is recognised, the better for the progress of the nation.
The United States understands this and that is why they are quickly mapping out the framework for the regulation of cryptocurrencies in the USA media report stated it like this: “The White House is reportedly preparing an executive action that will instruct federal agencies with regulating cryptocurrencies. According to this source, the national security memorandum, which is expected to be released in February, would assign portions of the government the task of analyzing digital assets and putting together a regulatory framework that would cover cryptocurrencies, stablecoins, and non-fungible tokens (NFTs).
“This is designed to look holistically at digital assets and develop a set of policies that give coherency to what the government is trying to do in this space,” said the source. In particular, those involved in the initiative would be, the State Department, Treasury Department, National Economic Council, and Council of Economic Advisers.
Russia is also not left out of this. Understandably and quite like Nigeria, cryptocurrencies have been a controversial subject in Russia for many years. While the government has warned of illicit uses for cryptocurrencies, it eventually gave them legal status in 2020, but banned their use as a means of payment.
Like our own CBN, the Russian Central Bank suggested banning the usage, trading and mining of cryptocurrencies over concerns of illicit funding and financial instability. However, other authorities, including representatives from the Ministry of Finance, believe regulation to be preferable to restrictions.
These conflicting approaches triggered President Vladimir Putin to request that the competing authorities “come to some kind of consensus,” at a recent government meeting. At the insistence of the central bank, the finance ministry prepared a concept for regulating the industry. Potential policies may include carrying out all crypto transactions through Russian banks, identifying crypto wallet holders, and classifying digital asset investors as either qualified or unqualified.
It is not too late for Nigeria to tour the Russia and US part. As one of the frontline countries in the adoption of cryptocurrencies in Nigeria, we need to realise that the crypto is the new oil, crypto signifies much more than hope for the Nigerian youth and young at heart. Crypto is here to stay and suppressing it is akin to a waste of time. In the last 365 days, this has not done any good. In fact, it led to the soaring of cryptocurrency. What to do? Consider regulation!