There is a very deep conversation which is going on LinkedIn since I wrote that the Nigerian government can indeed regulate cryptocurrencies like Bitcoin. As I noted, my preference is for the government to create our own cryptocurrency, NairaCoin, and tie its value to the Naira. I have a reason for that.
In commercial contracts which need to be insured, most times, you need to put monetary figures on them. If you have a contract that is created on blockchain and quantified in Bitcoin, in Nigeria, for the supplies of items and your partner refuses to do its part, after you have paid, you have to go to court to seek help. I do think most Nigerian courts may note that the Nigerian law does not recognize Bitcoin to assess the true value of that contract. In short, your partner can even countersue that the contract is voidable. Technically, you will have two issues to deal with:
- You have to prove to the court that blockchain contracts are legally enforceable in Nigeria. I know of a time when emails were not admissible in courts. And banks would not accept emailed instructions or mandates. The Law fixed that and we now take them for granted. Nothing has been done in the area of blockchain and the default is that such contracts are potentially voidable
- The Bitcoin is not a legal tender in Nigeria. The implication is that the monetary value is not permissible in Nigerian court. You will need to convince the court to offer value to that contract which largely was written outside the law. This is different from US dollar based contract. Nigeria is part of United Nations, and we recognize all global currencies. That means if you have a contract in South African rand, our court will enforce it. But today, I have no idea if any Central Bank has adopted Bitcoin and made it its legal tender.
Always remember that you can do anything you want in business. But what matters is when there is problem. I tell people to always operate in areas where there is clear certainty of the law unless they want to speculate and that speculation must be clear and evident.
This does not mean that we cannot advance blockchain-based technology. My point is that you are going to be surprised if things go bad. In short, for any Nigerian insurance company to insure your blockchain-based contract and the associated business it drives, you will expect them to be in the same financial system you are operating. If you are in Bitcoin and they are in Naira, I do not see how that insurance policy can be sold. Also, there is a possibility that the regulator, NAICOM, does not recognize Bitcoin. The insurers will not insure you, period. Sure, you can do business without insurance, but that may not be a good idea.
There was a time in U.S. when school kids recorded their “friends” intimate moments via webcam. Yet, district attorneys could not bring charges against the kids, because there was no law in the statue to prosecute those kids. Of course, the law has been upgraded to deal with such.
Yet, you can put your blockchain-contract in Naira, but since this is digitized architecture, my suggestion is to simply create a Nigerian cryptocurrency backed by the Central Bank of Nigeria so that Nigeria has its cryptocurrency (NairaCoin) which is tied to the Naira. That will make blockchain contracts more efficient. The NairaCoin will maintain exchange rates with Bitcoin and others, just as paper Naira has with U.S. Dollars and Euro, while making sure that the paper Naira and NairaCoin are always correlated.
*image: Nigeria’s Minister of Justice and AG, Abubakar Malami