Why Nigerian Crypto Community Is Angry With CBN

Crypto experts believe that the actions taken by the CBN have been rather detrimental to the growing industry.

The Nigerian crypto community recently received a shock when the CBN issued a circular warning financial institutions not to trade or facilitate payments for cryptocurrency exchanges.

Many young Nigerians involved in crypto are obviously dissatisfied with such a policy and know exactly the impact the apex bank has on Africa’s rapidly growing financial ecosystem.

Ever since the circular was released to the public and the fintech industry, political leaders have been angry at such a move by the Nigerian apex bank, as Bitcoin and CBN were among the top trends on social media upon the release of the circular.

Business mogul and former senator Benedict Murray-Bruce wrote on his Twitter handle wondering why such a move was taken so quickly.

“I thought its universal knowledge that decisions or policies regarding finance or the economy should never be hasty? Crypto,” Murray-Bruce queried.

Some crypto experts also believe that the CBN’s approach has been quite daunting for the growing industry.

Chimezie Chuta, Founder/Coordinator of the Blockchain Nigeria User Group, expressed disappointment and explained the impact the CBN directive could have on Africa’s largest economy.

Chuta said, “Thousands of young Nigerians are currently earning a decent living to put themselves through school via crypto trading. Many are sustaining their families and loved ones via crypto trading. What about the thousands of new businesses and jobs created by crypto innovation? What about the revenue that is flowing into the country as a result of the huge volume of trades being carried out on major exchanges?

Buchi Okoro, CEO, and co-founder of Quidax, Nigeria’s largest crypto exchange, had this to say; “CBN’s letter was like getting a spanking from your parents for good behavior. But out of respect you take it in stride and keep working harder.”

The latest CBN directive has already heightened fears among a growing number of Nigerian users, including millennials and small businesses, who are using these digital assets for payments and to hedge against fiat inflation.

Rume Ophi, partner and brand strategist at Vorem Nigeria, spoke about the impact of such a policy on a significant number of Nigerians, especially those who are new to cryptocurrency. He said;

“Newbies are going to be scared of losing their funds because they feel bitcoin and other cryptos can be destroyed by the government, which is not possible. Those that have invested in exchange platforms will feel terrible with such hostile directive, thereby preventing them from serving their customers.”

Former Vice President of Nigeria, Atiku Abubakar, who advised tax authorities through his Twitter account not to tighten Africa’s largest economy in view of the high youth unemployment in Nigeria, adds even more weight to the question.

“We Need to Open Up Our Economy, Not Close It.

“The number one challenge facing Nigeria is youth unemployment. In fact, it is not a challenge, it is an emergency. It affects our economy and is exacerbating insecurity in the nation.”

Corroborating on such bias, Adebayo Juwon, African Lead at a leading crypto exchange FTX said;

“The stiffness of the Nigerian government on crypto adoption has impacts on the growing industry of digital payment, but this is good for innovation, isn’t it? Decentralization of finance has endless possibilities; therefore, it is only rational for the government to get involved when they can. Innovation can’t be stopped; it can only be delayed.

“It is important to clarify that CBN didn’t ban crypto in Nigeria; they simply asked Nigerian financial institutions not to process crypto payments pending regulation.”

It is important to note that the CBN circular does not criminalize crypto and that protecting the Nigerian financial system is within the legal powers of the apex bank. However, some crypto experts believe that such exclusion from their financial ecosystem will put Nigeria at a disadvantage in the fintech space.

CBN had previously been warned by the U.S. FBI (Federal Bureau of Investigation) about the activities of criminals using crypto assets to smuggle hundreds of millions of dollars into the country Markets.

However, data from chain analysis has shown that the percentage of fraud-related illegal crypto activity in Africa is not as high as it is in other parts of the world. Illegal cryptocurrency activity accounted for just 2% of the region’s trading volume of around $16 billion from July 2019 to June 2020. Fraud made up 55% of this low-level illegal activity.

To justify its policy, the CBN issued a statement insisting that these cryptos are issued by unregulated and unlicensed companies, which raises the question of legality. He also claimed that cryptocurrencies were used to fund several illegal activities, including terrorism and money laundering.

Elelu-Bashir Mohammed, head of the Nigerian community at Crypto.com, gave valuable suggestions in a telephone interview about what the Nigerian crypto community expects from the Nigerian apex bank;

“I believe it’s time for the Nigerian government to start looking at ways Nigeria can benefit from the robust tech blockchain is offering such as voting mechanisms, IOT, supply chain, etc. The CBN should also invite the necessary stakeholders in the crypto and blockchain space and create a regulatory framework for financial institutions willing to extend their services to crypto-related businesses,” Mohammed said.

Additionally, Juwon revealed his thoughts on why Nigerian monetary stakeholders shouldn’t view crypto as a threat to the current financial system but should embrace the ever-changing financial instrument in emerging markets;

“The tech/crypto community in several countries receives tremendous support from their government. Blockchain Council reported that Australia, China, Dubai among other developed nations is making precise moves towards the adoption of blockchain and accepting crypto payment. According to Forbes, payments giant PayPal will allow its 346 million users to buy and spend bitcoin and a handful of other major cryptocurrencies,” Juwon said.

Rotimi Ogunwede, Marketing Director of Patricia, a fast-growing crypto payment company, explained the viable options Nigerians should follow to process their crypto transactions, taking into account regulatory restrictions;

“The new CBN policy will only encourage P2P trades which are even more unregulated unlike what Patricia has where we have KYC done on all users to ascertain their identity before any trade or exchange happens. We even go as far as linking users’ accounts to their individual BVN, to ensure transparency,” Ogunwede said.

Conclusion:

Financial experts also conclude that such a move by the financial regulator will distort the dynamics of the crypto market in Africa, given that Nigeria is a major player in the crypto-verse and home to many leading Crypto service providers providing employment and synergy in Nigeria’s Fintech space.

However, the recent CBN policy on crypto transactions requires the Nigerian crypto community and financial regulators to seek a unified approach that is beneficial to the Nigerian economy by increasingly educating both regulators and the public about the leverage they are providing for Africa’s largest economy.