In 2015, one could buy a Bitcoin for less than $400, even recently a video circulated of a man who said he bought a box of Pizza with “a couple of Bitcoins” back in 2010 when it was recently introduced (A couple of Bitcoins!). Today Bitcoin is worth well over $46,000, which is a growth of over 96,000% in just six years! For context, if you had one Bitcoin in 2010, and kept it till date, you would now have over $46k, ludicrous isn’t it?! That means, with one Bitcoin, now, you can get over 9,000 boxes of Pizza! And what is even more interesting is that, although Bitcoin is the most prominent, it forms just one of the hundreds of Cryptocurrencies in existence. There are a whole host of others like Ethereum with a market cap of over $357 billion, Binance Coin AKA BNB with a market cap of over $70 billion, and hundreds more. The question that is bound to arise then is: Why aren’t we all tapping into this gold mine of an industry and benefitting from it?
The nature and workings of the Cryptocurrency spectrum are complex and the intricacies run deep. It can be quite exhausting and frankly, a little boring to talk about. The simplest and easiest definition would be to refer to it as INTERNET MONEY. It is a digital payment system that does not rely on banks to verify transactions, instead, uses encryption through something known as “Blockchain Technology” to verify transactions. To learn more about the inner workings of Blockchain Technology, click here
Cryptocurrency apparently is happening now! The currency has become a topic of interest since the world witnessed the sudden drastic rise and subsequent fall and steady rise again of Bitcoin between 2017 and 2019. It sparked interest and education and now, Cryptocurrency has become more a part of the everyday norm than some people realize. On a global scale, more people have access to the internet than they have to banks or other currency exchange systems. This opens the opportunity for underprivileged people to establish credit. It also offers an opportunity for international business people or parties to make one-on-one exchanges online without the complications and added fees that traditionally come with international currency exchanges that involve third parties.
In furtherance of this money market disruption, Binance, one of the largest crypto exchanges in the world, also launched its Cryptocurrency on its app: The Binance Coin AKA BNB. Since its launch in 2017, Binance Coin has expanded past merely facilitating trades on Binance’s exchange platform. Now, it can be used for trading, payment processing, or even booking travel arrangements. It can also be traded or exchanged for other forms of cryptocurrency, such as Ethereum or Bitcoin. Several other platforms also offer the ability to trade with Cryptocurrency alongside keeping them in a digital wallet.
Given the popularity of Cryptocurrency and how complex its workings can sometimes be, Crypto exchanges have gone about trying to simplify the User Interfaces on their applications. Binance for example, launched its Cryptocurrency to facilitate easy transactions; by using Binance’s own coin, the success of transactions can be guaranteed and any lag or hitch can be accounted for. Binance also went about splitting their App into two different modes: The Lite mode and the Professional mode. One with an interface so simple for beginners with little to no knowledge of Crypto trading, and the other for, well… professionals.
Given all the beauties Crypto is pegged up to be, how as seen above, apps are effectively trying to simplify it, and how people all over the world are increasingly going about trading it, what then is the Nigerian reality?
THE NIGERIAN REALITY
According to Quartz Africa, in the last five years, Nigeria has traded 60,215 Bitcoins, valued at more than $566 million which apart from the United States of America, is the largest volume worldwide on Paxful, a leading peer-to-peer Bitcoin Marketplace. While this statistic may have brought smiles to the faces of many experienced and smart Crypto traders in Nigeria, it’s not all beds and roses. Due to the decentralized nature of Cryptocurrencies, meaning that the control and decision-making aren’t concentrated in one single entity, but instead, in a network of users; it was bound to raise eyebrows.
In consequence, the Central Bank of Nigeria on the 5th of February, 2021 issued a ruling instructing all financial institutions to stop the facilitation of all transactions involving the use of Cryptocurrencies. The CBN further went on to ask all the regulated bodies to identify individuals or organisations engaging in Cryptocurrency transactions within their system and shut down their accounts with immediate effects. An action that resulted in people who had words like “Crypto”, “Bitcoin”, “Ethereum” and other related Cryptocurrency terminologies in their transaction descriptions having their accounts frozen or shut down.
The question then is why? What motivated this action from the CBN?
Many reasons were given to justify the actions of the Central Bank, one of the most prominent of which was that they were alleged to be in use to facilitate scams and money laundering, actions which could be detrimental to the integrity of the Naira. However, it has also been alleged that the policies may or may not have been motivated by the #Endsars protests in the last quarter of 2020, with Crypto being the Hail-Mary when there were challenges in funding basic amenities for the sustenance as well as medical supplies and legal aid for the protesters. Key organisations accepting donations for the protests began to notice bank transactions were being slowed down while the online payment links to facilitate donations stopped working. While this may or may not have been caused by the intervention of the Government, the instrument of last resort was the use of Cryptocurrency.
Recently even, the Central Bank froze the Bank accounts of four fintech companies: Risevest, Bamboo, Trove, Chaka for a period of six months. The companies were accused of violating Nigeria’s trading laws including dealing in cryptocurrency in contravention of the CBN policy. These have resulted in a stifle in the crypto industry as it relates to Nigeria.
One of the fallouts of these stifling policies was a nudge towards creating new and innovative ways to trade Crypto without using the banks. A very popular option that was adopted by many was the use of P2P (Peer to Peer) transactions. A platform where you don’t buy BTC with the Naira directly from the exchange but you buy from another person. The P2P exchange only serves as a marketplace to bring buyers and sellers together. So, on P2P platforms, the buyer transfers the worth of bitcoin or any altcoin he/she wants to buy directly to the seller’s bank account just like the normal inter-bank transaction and the seller sends the crypto to the buyer’s wallet through the exchange. No financial institution is directly needed to facilitate the transaction, in the sense that, when money is sent from one account to the other, they are merely sent as cash gifts void of any relation to Cryptocurrency. It is no wonder that Nigerians have turned to P2P for their Cryptocurrency transactions.
Another solution was proffered by Luno, a well-known Crypto company, who put forward the idea of conversion of Cryptos into stablecoins designed to have a relatively stable price, typically through being pegged to a commodity or currency or having its supply regulated by an algorithm. The world’s first stablecoin, BitUSD, was released on 21 July 2014 and issued as a token on the BitShares blockchain. It was the brainchild of two leading figures in the cryptocurrency industry, Dan Larimer and Charles Hoskinson. From there, stablecoins grew from strength to strength, and since 2017, over 200 stablecoin projects have been announced, like USDT, USDC, etc. It is interesting to note that, the fact that Stablecoins are backed by real-world assets, like the US dollar, or commodities such as gold, means they offer protection for traders and investors during market volatility because investments in Crypto are mostly a high risk – high reward affair. They can help unbanked businesses send and receive money, they’re also easy to understand, are non-speculative, and are reliable assets.
Nigerians have also resorted to buying with other currencies like the US Dollar, Pound, and South African Rand, etc. thereafter you can exchange the currency into the Nigerian naira.
In conclusion, just as was realized by the Central Bank of Nigeria, Cryptocurrencies should be regulated not banned. This can be seen through the recent move by the CBN when it announced that it would launch its own digital currency on the 1st of October following advice by Vice President Yemi Osinbajo. The author suggests that to strengthen whatever policies are to be made, the Government may look into creating a forum where Stakeholders in the Cryptocurrency industry will be allowed to sit on the table where these policies are made, given that they are most largely affected by such policies. In consequence, their input will be taken into consideration and a middle ground for the establishment of effective and forward-thinking policies would be achieved.
- Kaspersky, ‘What is Cryptocurrency? Cryptocurrency Security: 4 Tips to Safely Invest in Cryptocurrency’: https://www.kaspersky.com/resource-center/definitions/what-is-cryptocurrency
- Premium Times, ‘Crypto Ban: What the future holds for Nigeria’s fintech companies,: https://www.premiumtimesng.com/promoted/457058-crypto-ban-what-the-future-holds-for-nigerias-fintech-companies.html
- Luno, ‘What is a Stablecoin?’: https://www.luno.com/help/en/articles/11000097390
- Fisayo Fosudo, ‘Why Nigeria banned Bitcoin – What you must know!’: https://youtu.be/5KYJo7clwyQ
- Forbes, ‘Top 10 Cryptocurrencies in August 2021’: https://www.forbes.com/advisor/investing/top-10-cryptocurrencies/
- Fox Business, ‘ What are the benefits of Cryptocurrency?’: https://www.foxbusiness.com/money/what-are-the-benefits-of-cryptocurrency
- Binance Academy, ‘How to Trade Bitcoin Futures Contract’: https://academy.binance.com/en/articles/how-to-trade-bitcoin-futures-contracts