On Friday 5th February 2021 Nigerians faced the news of a directive from the Central Bank of Nigeria to banks in the country informed them that dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges are prohibited.
In the circular the apex bank further instructed the banks and other financial institutions to identify persons or entities transacting in or operating cryptocurrency exchanges within their systems and ensure those accounts are closed immediately.
See the circular below
Now What Does this Mean to the Fledging Community of Nigerians who have been Actively Trading and Investing in Cryptocurrencies?
Lots of permutations currently fly in the face of this sad development. One thing is sure, it is a decision that threatens to take the country back to the ‘stone age’.
According to information on Binance, Nigeria is the country with the highest volume of cryptocurrency trading in the whole of Africa and second in the world (behind only the United States of America). This invariably has attracted the interest of government who as usual, act as to suppress what they do not understand.
This decision affects not just individuals’ ability to fund their cryptocurrency wallets and withdraw their cryptocurrencies to their bank accounts, this decision by the Central Bank also affects a lot of startups in the cryptocurrency space. Some of those whose operations will be impacted or are already impacted by this include
- cryptocurrency exchanges like Binance, Luno
- fintech apps that have cryptocurrency trading/exchange as significant parts of their operation: eg Patricia, Buycoin Africa
- payment processors/solution providers such as Flutterwave (they power significant cryptocurrency to bank transactions for exchanges like Binance)
- and a host of other financial technology companies including savings/investment apps that only recently added cryptocurrencies such as Bitcoin, Ethereum to the investment products they offer the public
This is significantly causing a ripple in the financial world and lots of people are already exploring their options.
Short term, some of the effects of this decision by the Central Bank of Nigeria, may include;
- increase in peer to peer transactions in cryptocurrencies
- this will result in further shortage of foreign currency flow through the normal channels the Central Bank is accustomed to
- This may also trigger an increased interest in crypto currency as more people act to put away their money from the reach of the government
- already as a result several exchanges have stopped the ability to fund one’s wallet/account to purchase cryptocurrencies
- We also believe, if not reversed, the decision may also impact on the growing prospects of the fintech space as it may greatly affect several companies whose operations are significantly affected
We will continue to monitor this space and look at options for anyone to continue to participate in the cryptocurrency revolution.