Cryptocurrencies are heralding a move towards a world where there is decentralization in all aspects of our lives – where no central institution or agency has complete control over finance, economies or technology.
This has been one of the central pillars behind the creation of crypto, and its subsequent popularity, especially in the last 12 months. However, even as crypto tokens continue to scale new highs, and more and more people all over the world are beginning to invest or trade in crypto, there are multiple countries and governments that are still wary, with some even looking to place outright bans on crypto. This is being done ostensibly to ‘protect’ people from fraud and manipulation, but in reality, central banks are worried about crypto’s ability to remove control of economies and monetary systems from this. We believe that the solution to this is effective regulation, not a blanket ban, but it seems as though the easy option is the one being sought by these countries, with Nigeria being the latest to join in.
Nigeria has been one of the most important economies in terms of crypto adoption over the last few years or so – data shows that Nigerians traded nearly $600 million worth of crypto in the last five years, making Nigeria the second-largest crypto market in the world, second only to the United States. Thus, Nigerians have been very keen to adopt crypto, but this is now being restricted by the country’s central bank. The Central Bank of Nigeria (CBN) has ordered financial institutions in the country to close accounts that have been involved in crypto transactions, with financial penalties for those who do not comply.
This has come as a shock to most Nigerians, especially given the reliance on crypto in the country already. Moreover, cryptocurrencies have already shown that they are faster, safer and more reliable than fiat currency transactions. Various sectors and businesses are using crypto and blockchain for this reason, especially online merchants and businesses. One such sector is the online gambling space, where we are seeing an increasing number of operators offering users the option to place bets through crypto, while also using blockchain to improve the reliability and security of transactions and the games themselves on their platforms. This is the reason why, for example, a newly formed casino online Winz already has an international license with crypto being used to ensure the security of customers’ transactions as well as personal information being stored on blockchain networks. This shows the security that crypto can provide, and it is therefore a surprise that the Nigerian central bank has opted to ban cryptos instead.
One of the reasons for this is the instability of the naira, the fiat currency of the country. Last year, the central bank had restricted the amount of foreign currency that Nigerians could spend and hold, due to the increasing trend of people buying dollars. Nigeria faces a huge dollar shortage at the moment due to a sharp decline in oil prices, which are its biggest export, and so with a reduction in dollar income, the central bank has restricted dollar outflows as well, with most banks only allowing withdrawals and transactions upto $100. Thus, bitcoin and other cryptos emerged as an alternative to this, allowing Nigerians to bypass these restrictions and exchange the fiat currency for something more valuable.
It is estimated that Nigerians own more than $4 billion of crypto – this is a huge amount, and there will be a significant loss of wealth if this money is restricted or banned from being accessed. The instability of the naira means that Nigerians will always try and find ways of holding their assets in a different currency or medium, and crypto is just the latest of those assets. The central bank needs to ensure that naira volatility is reduced and that its value does not continue depreciating if it wants to stop people from investing in other currencies and assets such as crypto, rather than imposing blanket bans.
