The adoption of cryptocurrency in Nigeria was greatly embraced, because of the strict foreign exchange policies and laws put in place by the CBN. Also, Nigeria has experienced a great decline in its value of Naira, which has made Nigerians seek alternate currencies and means of exchanging currency.
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Unfortunately, a ban was imposed by CBN, rendering illegal all bank transactions and accounts of persons involved in digital asset transactions with immediate effect. All Deposit Money Banks (DMBs), Non-Bank Financial Institutions (“NBFIs”) and Financial Institutions (“FIs”) must comply to stop the facilitation of payments for cryptocurrency exchanges; and identify persons/entities transacting in cryptocurrencies within their systems, and close such accounts. This decision was met with an uproar, and had a pronounced effect on the FinTech sector. The bank prohibits Nigerians from using their debit cards to directly purchase BTC and other digital assets.
Following this decision, it is no news that a mass exodus of potentials and companies have ensued, to other countries with favourable policies and laws. It could also serve as a limitation to the government’s aim to diversify the revenue of Nigeria.
However, Nigerian has found alternatives by taking advantage of peer to peer (P2P) trades, where intermediation by a third party is not required. Following Binance recent launch of an express mode for P2P trades, cryptocurrency users can now buy and sell on that platform without going through banks. There is also the possibility of setting accounts in foreign banks that are not affected by this regulation.
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It is also worthy of note that with this action, Nigeria can be said to have set a precedent, breeding mistrust and disinterest by other countries in the cryptocurrency market in Nigeria. This is because several countries in the continent do not see digital assets as legal tender, due to the difficulty in regulating digital assets.
The ban will also decrease the confidence of investors in the Nigerian market. It will reduce the rate at which venture capitals or other investors are willing to initiate and fund innovations in Nigeria.
Nevertheless, the growth of cryptocurrency across the world is astronomical and still improving. A better approach for Nigeria would have been to seek to understand how best this technology can be safely harnessed, as opposed to banning cryptocurrencies. Engaging in cryptocurrency will immensely help the government by driving more revenue and providing employment or increased income for the public.
In respect of the quality of the decision made by the Nigerian government, time will reveal this.
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