The Central Bank of Nigeria (CBN) said its decision to ban cryptocurrency was necessary to prevent crime and mitigate risk
Several Nigerians have condemned this decision and believe that the ban has a certain political connotation beyond these stated arguments.
Nigeria’s Senate summoned the Governor of the CBN to explain the decision to ban cryptocurrency.
In a move that sparked outrage on social media earlier this month, the CBN issued a reminder regulated financial institutions nationwide that a 2017 regulation prohibits them from trading cryptocurrencies or facilitating payments for cryptocurrency exchanges.
Following the outrage that greeted the incident, the CBN issued a press release explaining the reasons for its recall. According to the statement of Acting Director of Corporate Communications Osita Nwanisobi, prohibiting the facilitation of cryptocurrencies is necessary because they are used to commit crimes. He specifically mentioned terrorism and money laundering as crimes committed with cryptocurrency. He was also referring to Silk Road, the darknet site where cryptocurrency was used to buy drugs and other illicit goods.
CBN’s rationale for banning cryptocurrency
The CBN also asserted in its statement that the ban was necessary because of the risks involved in the speculative market, saying Nigerians must be protected.
However, many young Nigerians believe the ban is a consequence of the protests against SARS. The protests were part of a massive campaign in November 2020 against police brutality in the country. The protest began as a hashtag on social media, but quickly turned into in-person protests that shut down several cities for days.
As part of the measures to stop the protests, the CBN ordered banks to freeze the accounts of people associated with the protest. This was probably done with the belief that if funding was cut, the protests will cease.
But that move didn’t work, as donations were sent in bitcoin to fund the necessary logistics of the protests. The movement also received support from Twitter co-founder Jack Dorsey. Many believe the reminder of the CBN’s ban on cryptocurrency facilitation is further retaliatory action by the government.
Reactions
Nigeria ranks second in the bitcoin market after the United States in volume traded through the Paxful exchange. It’s no wonder, then, that news of the ban recall was taken badly on social media. Several people pointed to the recall as further proof of the ruling government’s anti-youth agenda.
Following recently released regulatory proposals for cryptocurrency investments by Nigeria’s Securities and Exchange Commission (SEC), others have also pointed to the divergence in decision-making among financial regulators. This suggests the lack of cooperation between government institutions regulating the Nigerian financial sector. The SEC has suspended its regulatory plans following the CBN ban recall.
Cryptocurrency exchanges operating in Nigeria have also stopped accepting or facilitating transactions involving the naira. Many of these platforms informed their users of the decision on social media.
The CEO of the world’s largest cryptocurrency exchange, Binance, used twitter to ask users to withdraw their naira on the exchange or convert it to cryptocurrency.
This is what happens when you try to “ban crypto” 👇.
If you have $ NGN on Binance, you can: 1. withdraw NGN soon, or 2.convert to #crypto and hold it
It is likely that Nigerian banks will stop working with the exchanges. P2P trading is likely to flourish as a result. https://t.co/GhA6M2GMOg
Speaking of Binance’s withdrawal from baira trades, local economist Nonso Obikili Noted the importance of Binance in the cryptocurrency industry in Nigeria. According to him, the daily volume of naira-crypto transactions on Binance has exceeded that of the Nigerian stock exchange.
He said that while the trading volume on the Nigerian stock exchange was 5.6 billion naira on February 5, 2021, that of BTC / NGN transactions on Binance alone was 13.4 billion naira. Since Binance is just one exchange among many, the overall trades would likely be much higher.
How important is crypto to Nigeria? On binance today, the value of BTC / NGN transactions was worth 13.4 billion naira. For context, the volume of trade on the Nigerian stock exchange today was 5.6 billion naira. And binance is just an exchange.
Additionally, tweeting about Binance’s statement, crypto enthusiasts said Nigerians don’t need to panic. According to Nigerian blockchain engineer Tosin Olugbemiga, all a user needs to do is avoid depositing on the platform. It is also required that the user exchange any naira balance for USDT.
Stop depositing naira on Binance
Immediately exchange your naira for USDT if you have a naira balance
Don’t panic sell your crypto assets.
It is a global trading system which CANNOT be affected by Nigeria CBN policies.
Many Nigerians have also questioned the logic of the CBN recall, saying there is no rational argument for it and that, given its effects, it could work against the promises from the current administration to lift 100 million Nigerians out of poverty.
A social media commentator, Japhet Omojuwa, tweeted that the CBN cannot pretend crypto traders in Nigeria are anonymous. This is due to the processes involved in owning a bank account in Nigeria, from having a bank verification number to KYC regulations in place to ensure banks know their customers.
You cannot trade crypto through a Nigerian bank without your BVN. Followed by a standard KYC protocol. There is no secret here. There are limits on wire transfers and other checks. It has nothing to do with anything other than the typical government standing against the people! https://t.co/QqQWV7unpF
Others mentioned other social problems currently plaguing the country, such as attacks by shepherds. As a Twitter user Ebovi Wali pointed out, there is irony in a government debating open grazing regulations for many years, but quickly banning cryptocurrency.
Nigeria may ban crypto trading overnight, but has been discussing the open-air grazing ban for almost a decade ??
In addition, according to Adewale Yusuf, CEO of TalentQL, government policies restricting cryptocurrency activities for startups could deter foreign investors.
I just spoke with a foreign investor who has invested in Gokada and a crypto startup in Nigeria. He is really worried.
Other investors also noted that the new policy did not address the reason for Nigerians’ adoption of cryptocurrency and the currency issues. So policies like this could push investors and even tech startups to go to other African countries.
Nigeria’s former vice president Atiku Abubakr also condemned the ban. From his perspective, this would potentially reduce the inflow of capital into Nigeria.
Lawmakers summon CBN governor
In light of the outcry surrounding the ban, the upper chamber of the senate called on CBN Governor Godwin Emefiele to appear before it and explain the decision. The Securities and Exchange Commission was also convened.
The Senate resolved after considering a motion raised by Senators Istifanus Dung Gyang and Adetokumbo Mukhail Abiru. Senators raised the motion to discuss the issue and said cryptocurrency emerges as both an opportunity and a threat.
It was co-sponsored by Senator Mukhail Adetokumbo Abiru, who made arguments for and against cryptocurrency transactions in the country. He highlighted the various risks associated with it and the threats it represents.
However, he also highlighted the many benefits of cryptocurrency and its gradual adoption by institutional investors. In his view, banning CBN will not stop the economic benefits of cryptocurrency transactions. It is therefore 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 committees on ICT and cybercrime, financial markets, banking, insurance and other financial institutions to analyze the issue.
This is a guest post by Oluwapelumi Adejumo. The opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
