What Remains After Nigeria Lifts Ban On Bitcoin and Broad Cryptocurrency

When Nigeria banned cryptocurrency, I was disappointed: “ There is really no issue here since Nigeria could not engage in conversations with its young people before making decisions. If there were things which needed to be fixed, the nation could have done so through consultations. Using fiat statements like we just did will never win more investments.” https://www.tekedia.com/nigerias-big-ban-on-cryptocurrency-and-what-startups-are-already-doing/

Understand that I am not a Bitcoin or cryptocurrency person. While I own a couple because I accept payments via BTC, ETH, etc, I have never bought one except for an academic purpose. Yes, to enable me write, engage, discuss, etc, with facts, I do trial some technologies as part of learning. 

Where am I going?  Nigeria has just modulated its position on cryptocurrency: “The Central Bank of Nigeria (CBN) has announced a monumental policy shift, effectively lifting its longstanding ban on cryptocurrency transactions within the country. This move comes as the CBN introduces a regulatory framework, aimed at both managing the associated risks of virtual assets and leveraging their immense potential.”

Good People, we should commend the central bank for this reversal. In May 2022, I did ask the apex bank to change its policy, and mirror what SEC Nigeria was doing: “First, I commend the SEC for at least starting a conversation on regulating this fledgling sector. As I noted yesterday, only the government will save Bitcoin from itself. Yes, while some can trade and hodle $200, for the real players with $billions to come along, you need an order which only the government can offer. With what SEC has published, there is a small clarity now for innovators to navigate in Nigeria; that is better than an outright ban.”

Now that CBN and SEC have come along, my other suggestions remain as presented in May 2022: “Secondly, I will also ask the SEC to work on an Act with the National Assembly to make it evident that crypto assets are clearly protected by current law. Decades ago, emails were not admissible in some courts, voiding contracts executed via emails. That loophole has been fixed with updated laws. Crypto assets must be clearly unambiguous and I do think we may need small regulations to bring that up to speed. The SEC needs to check this and ratify where necessary.”

Comment on Feed

Comment 1: In principle, cryptocurrency was never banned in Nigeria.

My Response: On the crypto ban, it is the difference between 12 and a dozen. Provided banks cannot knowingly open bank accounts for crypto firms, it is banned because no one can do business without a bank account.

Comment 2: This is one of the reasons the Naira kept depreciating due to unscrupulous decisions like this, banning cryptocurrency gave birth to many Escrow platforms in Nigeria which meant no good for our FX because there is no way the government can regulate its activities. Being a Crypo Enthusiast myself I reckoned telling some of my associates that this policy will only cause woes for our FX and am happy they are waking up to reality. Another policy they need to reverse with immediate effect is the direct international payments with our Nigerian Cards, for Christ’s sake what is wrong with this people you ban payments with your local cards and people go to sort for dollars through other meas and you are loosing the tax and benefits you could have gotten through direct payments. They are a lot policies that needs review and with involvement of the youths like Prof. Ndubuisi Ekekwe have said.

Comment 3: Spot on Prof! Observing the regulatory framework of countries like Elsavador where Bitcoin has long been embraced as a legal tender can provide insights into how Nigeria could potentially structure regulations and legal protections for crypto assets within its financial system. Understanding how developed nations integrate crypto into everyday transactions and banking services could inform strategies to enhance financial access for underserved populations. The government and the SEC can set up a team to study the adoption rates and infrastructure development.

2024 will be a great year for crypto, the bull market will likely return from the current technical and fundamental analysis. The Bitcoin ETF which is about to be approved signals a significant milestone, potentially unlocking new avenues for investors and institutions. With this impending development, the Federal Government has a unique opportunity to capitalize on the burgeoning crypto market by fostering a regulatory environment that encourages innovation, protects investors, and harnesses the transformative potential of blockchain technology.

My Response: Sure – crypto has a promise in 2024 but Nigeria should not follow that path of El Savador in totality of course. I am not necessarily in support of Bitcoin unless for as a means for exchange of value, but when it comes to an investment vehicle, I am concerned as if we follow all the way, we can lose all tools we need to modulate the monetary policy when suddenly most transactions are happening in BTC, ETH and not the Naira which the central bank can influence. The key thing is a balance and that means allowing the future even as you do not allow that future to destroy today!

Comment 4: Considering Nigeria’s stance on cryptography, implementing fair regulations could indeed unlock numerous benefits. Here are some ways the government could accrue revenue through crypto:

1. Taxation: Clear tax regulations on crypto transactions.

2. Regulation and Licensing:Establishing a regulatory framework can generate revenue through licensing fees.

3. Government-Owned Cryptocurrency: Creating a state-backed digital currency provides a regulated alternative.

4. Blockchain Projects: Supporting local projects stimulates economic activities, generating revenue.

5. Education and Training:Promoting blockchain education creates a skilled workforce, attracting investment.

Balancing benefits and regulations is key for a successful crypto approach in Nigeria.

Prof. Thanks for bringing up this.

My Response: Great thesis there. The #5 is a promising opportunity if Nigeria can turn the interests of our young people have into something more productive

When Nigeria banned cryptocurrency, I was disappointed: “There is really no issue here since Nigeria could not engage in conversations with its young people before making decisions. If there were things which needed to be fixed, the nation could have done so through… pic.twitter.com/ZE4x8IvS2i

— Ndubuisi Ekekwe (@ndekekwe) December 23, 2023

Comment 5: Good policy but bad timing. At a time when confidence in the Naira as a storage of value is at all time low, removing the ban on crypto simply creates an avenue for the capital flight of looted resources to decentralized exchanges. I won’t be surprised if the demand for USDT spikes to astronomical numbers. The CBN’s first priority should been to explore policies geared towards strengthening and stabilizing the Naira from free fall. Like I said earlier, it’s a good policy but the timing is wrong.

My Response: You have a point there. But note that many posit that many escrow accounts in Nigeria evolved because of the ban, and those escrows operate outside the banking system. Just like the 43 banned items which are now in NAFEM, CBN is trying to bring everything to where it can see what is happening. 

Allowing the crypto ban is expanding Nigeria’s informal economy which is HUGE. That is why our stock market is worth $50b when South Africa’s is close to $1 trillion. The ban accelerated the crypto informal domain and that is not good.

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