When the news broke out about the ban by the Central Bank of Nigeria on cryptocurrency, several negative rumours rented the air.
Nigeria is currently the world’s second-largest Bitcoin market in the world. The news of the ban on cryptocurrencies was sure to generate reactions across the nation. If you are one of those Nigerians who are confused and worried about the news, here is all you need to know about the ban on cryptocurrencies.
WHAT ACTUALLY HAPPENED?
The Central Bank of Nigeria sent a letter to all banks across the country on the 5th of February, 2021. In the letter,CBN strictly instructed the banks to cease dealing in cryptocurrency or aid any cryptocurrency payments.
The CBN also took it a step further and instructed the banks to look through their systems and identify any person or group that was in any way involved in the exchange of cryptocurrency. Upon discovery of these persons, the banks were to close down their accounts with immediate effect.
This instruction was contained in a circular signed by Bello Hassan and Musa I. Jimoh. The latter who is currently the Director of Banking Supervision and the former the Director Payments System Management Department. The circular also had the logo of the Central Bank of Nigeria. The circular gave regulations and instructions concerning the payments and use or Cryptocurrency within the country.
WHY THE BAN?
I’m pretty sure you are not the only Nigerian wondering why the CBN had to place a ban on Cryptocurrencies.
In the circular, there was no clearly stated or defined reason for the ban.
According to the authorities of the Central Bank of Nigeria, the ban was nothing new. It had earlier said on previous dates that it did not want people within the country investing in crypto. In 2017, the Central Bank of Nigeria warned that dealing in crypto was risky and warned youths in the country to desist from such investments. The authorities of the Central Bank said that to protect the youths of the country, they had no other choice but to go ahead with the ban.
WHAT’S THE IMPLICATION OF THE BAN?
Unlike earlier touted by several people upon hearing the ban, because of the nature of Cryptocurrencies, the CBN cannot outrightly ban the use of crypto within the country. They can only control the means by which you can acquire or sell cryptocurrencies in Nigeria.
The earlier shared circular was addressed to Deposit Money Banks (DMB), Non-Bank Financial Institutions (NBFIs) and Other Financial Institutions (OFIs). What you need to understand is, these organizations facilitate the exchange of Cryptocurrencies. Without the involvement of these Institutions, it will be much harder to buy and sell Bitcoin or other coins or tokens. This is exactly the aim of the CBN. In the circular, strict instructions were given to these Institutions not to facilitate payments for the exchange of crypto.
Most crypto exchanges like Quidax, rely on these organizations to perform bank transactions. NBFIS and OFis partner with them to aid in processing transactions using debit cards and transfers within Nigeria. Thanks to the instruction given in the circular, these institutions can no longer provide that assistance to crypto exchanges.
If the instructions of the CBN are followed to the letter, you can no longer fund or withdraw using a crypto exchange as a Nigerian.
THE REACTION OF THE CBN TO THE OUTRAGE
When the letter found its way to social media, it sparked a chain of reactions. In its defence, the authorities of the Central Bank of Nigeria said that the circular was a reminder and that it was never in support of cryptocurrency at any time. Just in case you are wondering, the CBN had stated severally earlier that dealing with crypto within the country was not backed by law.
Before the 5th of February, the SEC; Security and Exchange Commission was already making attempts to control the use of cryptocurrency in the country. You might be wondering the reason for these attempts. According to the commission, cryptocurrencies had to be regulated because it was an alternate option for people to invest and keep their money.
WHAT NEXT NOW?
It’s first important for you to realise that cryptocurrencies are not just meant for Nigeria alone. Crypto is gaining recognition both in Nigeria and across the globe.
The second thing is that cryptocurrencies have a major advantage. It is above regulation and cannot be completely banned by the Central Bank of Nigeria or any other authority globally. Nonetheless, the CBN has the capacity to limit how you can buy or sell cryptocurrencies like Bitcoin within the country.
However, there are still ways to buy and sell crypto within the country. If you are already holding cryptocurrency the ban does not call for panic. If your chosen currency appreciates, your holding will also continue to increase in value.
However, if you intend to buy or sell crypto, your most likely alternative to the cryptocurrency exchange seems to be Peer -2- Peer transactions(P2P). Using P2P such as Remitano, you can still own, buy and sell cryptocurrencies if you desire.
At a point where people around the globe are recognizing and accepting cryptocurrency, it is quite disappointing that Nigeria is placing a ban on it.
Nonetheless, If you read to this point, then you must understand by now that the CBN cannot totally ban the use of cryptocurrencies. It’s a global currency and cannot be regulated. However, CBN has made it harder for you to buy or sell crypto.
At the moment, buying and selling crypto within the country will require a peer to peer exchange. You will have to be a lot more careful about fraud and being robbed of your money.
Despite the setbacks, the ban does not call for alarm or panic. There is an available alternative in the form of peer to peer transactions. It is still very much possible for you to trade crypto even as a Nigerian.