It’s time the Central Bank of Nigeria had a rethink about approach to crypto in Nigeria, says blockchain association leader

Introduction

According to a recent news by the Punch which reportedly relied on data shared with it by Paxful, a leading peer-to-peer cryptocurrency platform, Nigerians reportedly traded about N77.75bn ($185million) worth of bitcoin in the first quarter of 2022. In the same corresponding period of January–March 2021, the value of bitcoin traded was N73.54bn. This represents a 5.71% increase from last year’s total value. In that quarter, bitcoin trade from Nigeria accounted for a quarter (25.87%) of the total N300.48bn ($715milliom) traded on Paxful.

Notably, Paxful is one of the few bitcoin & crypto platforms that is originally a peer-to-peer (P2P) platform, thus its user base has increased significantly after the CBN cryptocurrency restriction.

Similarly, KuCoin, a global crypto exchange that launched a Nigerian community in May 2021, recently announced that over 33 million Nigerians trade on its platform. According to “33.4 million Nigerians, which accounts for 35% of the population aged 18 to 60, currently own cryptocurrencies or have traded cryptocurrencies over the past 6 months”. Of this number, “52% of Nigerian crypto investors allocate over half of their assets to cryptocurrencies” while “65% of Nigerian crypto investors make fiat deposits to cryptocurrencies via peer-to-peer trading”. According to KuCoin’s findings, “70% of Nigerian crypto investors intend to increase their cryptocurrency investments over the next 6 months, giving reasons to believe that digital asset adoption in the country is accelerating”.

While KuCoin’s figures may be debatable, the continued adoption of cryptocurrency by Nigerian households is not.

As reported by the Punch, Chimezie Chuta, Founder & Cordinator of Blockchain Nigeria User Group (BNUG) believes that the P2P nature of cryptocurrency is behind its current adoption regardless of restrictions against it in Nigeria’s banking and financial system: “Crypto is designed to be P2P and the only way we started talking about bank accounts is for easy offloads or what we call unwrap.”

Concerning the Central Bank of Nigeria’s (CBN) current restriction of cryptocurrency, Mr. Chuta pointed out that “[i]f people are confident or comfortable with just exchanging crypto to crypto in the P2P environment, then there is nothing that can stop it. And that is what happened after the CBN banned crypto and most of the trading went to P2P. P2P is person to person, there is nothing that can happen to that.”

Senator Ihenyen, current President of Stakeholders in Blockchain Technology Association of Nigeria (SiBAN) and General Secretary of Blockchain Industry Coordinating Committee of Nigeria (BICCoN) maintain that what Nigeria needs is risk-based regulation, not restriction. In a chat with one of our correspondents, he said:

“Banning an innovation we do not yet fully understand may in fact harm us in ways we do not currently realize until we achieve full understanding. Just as fiat currency cannot be bad until a bad actor uses it badly, cryptocurrency cannot equally be bad until a bad actor uses it. Regulation should keep the good actors in and the bad actors out”.

“This is why I think that the Nigerian government, including our regulators,  should focus resources on promoting the legitimate use of cryptocurrencies or cryptoassets while discouraging its illegitimate use. The first step to doing this is inclusiveness. And this is why I welcome, generally, the regulations introduced by the Securities and Exchange Commission (SEC) last month.”

Earlier, in a separate correspondence with the Punch, Senator Ihenyen emphasized the need for the CBN to reconsider its stance on cryptocurrency. In his words:

“I strongly believe that it is time the CBN rethinks its stance on crypto in Nigeria. No doubt that the CBN must have had compelling reasons for shutting out cryptocurrency in the country’s banking and financial system in February 2021.

 “But 15 months later, all stakeholders, including the CBN, must have benefitted from seeing the true facts and figures of cryptocurrency adoption as well as the risks and opportunities. Today we know that less than 1 per cent of cryptocurrency transactions are linked with illicit transactions.

“Today we know that our law enforcement agencies need more transparency in order to aid their investigations, not the current blackout in the space. Today we know that crypto exchanges such as Binance, Luno, Bundle, and the rest of them are the centralized gateway to the crypto world that should be accommodated as allied partners to CBN and other regulators.”

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