Friday, 26 February 2021

Why Nigeria Banned Bitcoin - What You Should Know


In this video, I discuss CBN’s (Central Bank of Nigeria’s) decision to ban cryptocurrency. In February of 2021, the CBN issued a letter stating that banks are prohibited from transactions with companies that deal In cryptocurrency. This has led to massive devastation and huge losses for businesses. This is my summary of the situation and my recommendations. What are your thoughts?


The First CBN Letter in 2017

The first circular on Cryptocurrency by the CBN was a letter in 2017 which they referred to cryptocurrency as Virtual Currencies. The concern of the CBN was that Crypto is untraceable, anonymous and hence can be used by criminals to launder money and finance terrorism.
 

The SEC Notes on CryptoCurrency

The SEC, which is the Security and Exchange Commission in Nigeria whose main duty is to regulate investments and securities in Nigeria called cryptocurrency an asset. A digital asset.

The “Ban” of Crypto Currency in 2021

All of that brings us to today, where the CBN issued a letter in February of 2021 that dealing in Bitcoin or any cryptocurrency for that matter by banks is prohibited or in other words, it’s been banned forbidden.
More “details” also came out about how the FBI tipped the CBN that some Nigerians were using bitcoin to target stimulus packages from the US and the west in bitcoin, this was on the front page of ThisDay Newspaper.


The Numbers

According to a Quartz article, Nigeria, in the last 5 years, Nigeria has traded over 60,000 bitcoin or 566 million dollars which is second only to the US on Paxful.

Not just that though, there was a report by Stears that Nigeria traded as high as $200 million dollars in Bitcoin per month aka over 95 billion Naira way more than the Nigerian Stock Exchange did in the span of 3 months in the 2nd quarter of 2020. That is crazy! The BuyCoins CEO on Medium stated that in Nigeria they traded more than $141 million dollars in 2020 alone, that’s over 67 billion Naira, similarly, BitSika on Twitter posted that they also transacted over $39 million dollars of which Nigerians deposited $18 million dollars, that’s a total of almost $200 million dollars in a year and that’s just 2 companies.

Why did the CBN Ban Crypto?

The CBN is most likely worried about 2 things, one is Fraud. Nigeria is kind of infamous for the word 419, there’s the case of the “yahoo boys”. The other is the reason which would have made CBN ban Bitcoin is the strain on foreign exchange. The CBN has been making a lot of moves to help the Naira and stop more US dollars from leaving Nigeria. So last year, they banned the use of dollars for food and fertilizer imports, they reduced the spending limit on many many Naira cards, I think the limit is like $100 per month

The Result So far (How we are Affected)

Immediately after that announcement was made, cryptocurrency companies like Quidax, BuyCoins, Binance, Patricia and the likes have issued similar statements. They mostly mentioned that now you cannot fund your account with Naira anymore. What this simply means is that Nigerians cannot buy Bitcoin with their Naira, which cuts off cryptocurrency exchange platforms so you would only have to trade with someone you know who already has bitcoin one on one.

Solution: Way Forward

Speaking of solutions. Going back to the roots of trading bitcoin by P2P or Peer to Peer trading with individuals on platforms that power it. Right now on almost all these platforms, you are able to send and receive bitcoin into your wallet so you’re covered. One major platform that works is Paxful. Also, If you’re a freelancer who mainly receives foreign exchange, or you still want to keep trading bitcoin and/or just want to secure your finances, work on creating a Domiciliary account in Nigeria.

What are your thoughts about what’s going on? Would you say the CBN was right by doing this? Could they have done something better? Just let me know what your thoughts are in the comments.

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