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Why Nigeria’s crypto crackdown could be a setback
Around two months ago, the Nigerian Central Bank issued a rule which ordered all banks in Nigeria to restrict all accounts related to or involving crypto transactions. Since the country is one of the biggest crypto markets internationally, this came as a huge surprise for the community all over the world
When they say Nigeria is one of the biggest crypto markets, they are not lying. The country traded more than $400 million in cryptocurrencies in 2020, making it the second largest globally. 74% of Nigerians have stated that they own or owned crypto at some point in time.
Why is crypto so popular in Nigeria?
The main reason for its popularity is the Nigerian fiat currency, the Naira, which has proven to be quite volatile and unstable in the past few years, as it lost so much of its value after extreme inflation. People were turning to cryptocurrency as a way to combat the inflation of the Naira. What made this even worse is the low price of crude oil this year, as that is Nigeria’s largest export.
Since crypto is decentralized and is not controlled or managed by the government, many Nigerians decided to look into it and consider it as an option. Businesses, as well as people, have been buying and selling crypto in the country for quite a while now, seeing it as a solution for the inflation. Crypto is now also being used in Nigerian online casinos, mainly in crypto casinos, where players have the option to pay or withdraw in crypto.
Through all of this, cryptocurrency has turned into a vital part of the national economy. The central bank in Nigeria has been very uneasy about crypto since it soared in popularity, when it even issued a circular in 2017 which asked commercial banks to stop all virtual currency transactions.
Why does the central bank avoid crypto?
The CNB’s reasons for staying away from cryptocurrency mainly consist of volatility, as crypto is not considered a stable currency which is able to be used as a way of exchange. Now even though this may apply to Bitcoin and other cryptos, it is not true for XRP and XLM, as well as some others, as they have been made for the processing of payments.
Aside from that, the CBN is also convinced that since crypto transactions are entirely anonymous, they are more prone to being used in fraudulent activities. This is a valid concern to have, however crypto transactions are much more secure than their fiat counterparts since they run on a blockchain technology.
And despite having valid concerns, outright banning these digital currencies is not the way to go. Since crypto has shown massive potential over time, and is a way of helping Nigerians feel more secure with their money compared to unstable fiat such as Naira, it is important to find a better solution to these issues and fears.
Crypto regulation has also seen some advancement over time, which will surely bring some answers surrounding safety concerns. Instead of imposing a blanket ban and moving along, the CNB should consider looking into user education and entering deals with crypto firms and even regulators.