The Central Bank of Nigeria (CBN) said its decision to ban cryptocurrency was necessary to prevent crime and mitigate risks
Several Nigerians have condemned the measure and believe that the ban has a political tone beyond the stated reasoning
The Nigeria Senate called on the CBN governor to explain the decision to ban cryptocurrency.
In a movement that generated outrage on social networks earlier this month, CBN issued a reminder to regulated financial institutions in the country that a 2017 regulation prohibits them from trading in cryptocurrencies or facilitating payments for cryptocurrency exchanges.
After the indignation that welcomed the incident, CBN released a press release that explains the reason for its reminder. According to the statement by Acting Director of Corporate Communications Osita Nwanisobi, banning the facilitation of cryptocurrencies is necessary because they are used to commit crimes. He specifically mentioned terrorism and money laundering as crimes perpetrated with cryptocurrency. He also referred to Silk Road, the darknet website where cryptocurrency was used to buy drugs and other illicit goods.
CBN’s reasoning to ban cryptocurrency
CBN also said in its statement that the ban was necessary due to the risks involved in the speculative market, saying that Nigerians should be protected.
However, several young Nigerians believe that this ban is a consequence of protests over the end of SARS. The protests were part of a massive campaign in November 2020 against police brutality in the country. The protest started as a hashtag on social media, but soon turned into personal protests that closed several cities for days.
As part of measures to prevent the protests, CBN instructed banks to freeze the accounts of individuals associated with the protest. This was probably done with the belief that if funding is cut, protests will stop.
But that move did not work, as donations were sent in bitcoin to finance the necessary logistics for the protests. The movement was also supported by Twitter co-founder Jack Dorsey. Many believe that the reminder of CBN’s ban on cryptocurrency facilitation is further government retaliation.
Reactions
Nigeria is the second largest bitcoin market, after the United States in volume traded by the Paxful exchange. Therefore, it is not surprising that news of the ban reminder was poorly received on social media. Several people highlighted the reminder as further evidence of the ruling government’s anti-youth agenda.
Following the recently released regulatory proposals for cryptocurrency investments by the Securities and Exchange Commission (SEC) in Nigeria, others also pointed out the divergence in decision making between financial regulators. This suggests the absence of cooperation between government institutions that regulate Nigeria’s financial sector. The SEC suspended its regulatory plans after the CBN ban reminder.
Cryptocurrency exchanges operating in Nigeria have also stopped accepting or facilitating transactions involving naira. Many of these platforms informed their users about the decision on social networks.
The CEO of the world’s largest cryptocurrency exchange platform, Binance, used Twitter to instruct users to withdraw their naira from the purse or convert it into a cryptocurrency.
This is what happens when trying to “ban cryptography” 👇.
If you have $ NGN in Binance, you can: 1. withdraw the NGN soon, or 2. convert to #crypto and hold
Nigeria’s banks are likely to stop working with exchanges. P2P commerce is likely to flourish as a result. https://t.co/GhA6M2GMOg
Speaking about Binance’s withdrawal from baira transactions, local economist Nonso Obikili noticed the importance of Binance in the cryptocurrency industry in Nigeria. According to him, the daily volume of naira-cryptographic transactions at Binance surpassed that of the Nigeria Stock Exchange.
He stated that, while turnover on the Nigeria stock exchange was 5.6 billion naira on February 5, 2021, BTC / NGN turnover at Binance alone was 13.4 billion naira. Considering that Binance is just one exchange among many, general transactions are likely to be much larger.
How important is cryptography in Nigeria? At binance, today the value of BTC / NGN trades was worth N13.4bn. To put it in context, the volume of trade on the Nigerian stock exchange today was N5.6 billion. And binance is just an exchange.
In addition, while tweeting about the Binance statement, crypto enthusiasts said that Nigerians need not panic. According to Nigeria’s blockchain engineer Tosin Olugbemiga, all the user needs to do is avoid depositing on the platform. It is also necessary for the user to exchange any naira balance for USDT.
Do not deposit naira again at Binance
Immediately exchange your naira for USDT if you have naira balance
Do not sell your cryptographic assets in a panic.
It is a global trading system that CANNOT be affected by Nigeria’s CBN policies.
Many Nigerians also questioned the logic behind the CBN reminder, saying that there is no rational argument for this and that, given its effects, it could be contrary to the current government’s pledges to lift 100 million Nigerians out of poverty.
A social media commentator, Japhet Omojuwa, tweeted that the CBN cannot claim that crypto traders in Nigeria are anonymous. This is due to the processes involved in holding a bank account in Nigeria, from having a bank verification number to the KYC regulations in place to ensure that banks know their customers.
You cannot trade encryption through a Nigerian bank without your BVN. Followed by a standard KYC protocol. There is no secret here. There are limits on transfers and other checks. This has nothing to do with anything other than the typical government position against the people! https://t.co/QqQWV7unpF
Others mentioned other social issues that currently plague the country, such as attacks by pastors. As a Twitter user Ebovi Wali pointed, there is an irony in a government debating open grazing regulations for many years, but quickly banning cryptocurrency.
Nigeria may ban the crypto trade overnight, but for almost a decade it has been arguing about banning open grazing.
Furthermore, according to Adewale Yusuf, TalentQL’s CEO, government policies that restrict cryptocurrency deals to startups may be discouraging foreign investors.
I just spoke to a foreign investor who invested in Gokada and a crypto startup in Nigeria. He’s very concerned.
Other investors also noted that the new policy does not address the reason behind Nigerians’ adoption of the cryptocurrency and monetary problems. So, policies like this can push investors and even technology startups to go to other African countries.
Nigeria’s former vice president Atiku Abubakr also condemned the ban. In his view, this would potentially reduce the inflow of capital into Nigeria.
Legislators summon CBN governor
In light of the turmoil surrounding the ban, the upper house of the Senate asked CBN Governor Godwin Emefiele to appear before her and explain the decision. The Securities and Exchange Commission was also called.
The Senate resolved after considering a motion raised by Senators Istifanus Dung Gyang and Adetokumbo Mukhail Abiru. Senators raised the motion to discuss the matter and said the cryptocurrency appears as both an opportunity and a threat.
It was co-sponsored by Senator Mukhail Adetokumbo Abiru, who presented arguments for and against cryptocurrency transactions in the country. He pointed out the various associated risks and the threats they represent.
However, he also highlighted the various benefits of cryptocurrency and its gradual adoption by institutional investors. In his view, the ban on CBN will not hinder the economic benefits of cryptocurrency transactions. Thus, it is necessary to have a holistic view of the issue.
The motion was finally passed after Senator Hassan Hadejia proposed an amendment that will allow Senate commissions on ICT and cybercrime, capital markets, banks, insurance and other financial institutions to look into the matter.
This is a guest post by Oluwapelumi Adejumo. The views expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
