On the 5th of February, 2021, the Central Bank of Nigeria headed by the Governor, Emefiele Godwin issued a circular prohibiting financial institutions from facilitating cryptocurrency transactions. The nation’s apex bank also said it will sanction financial institutions if they do not investigate and close down accounts known to transact in cryptocurrencies.
Over the months that will follow, several players in the Nigerian crypto industry will fight and try to have the CBN reverse its action. The Nigerian Senate will also invite the CBN Governor to appear before it and explain the WHY for the restriction on cryptocurrency transactions through its infrastructure.
With several court appearances and the court declaring its action illegal, and publishing names and Bank Verification Number (BVN) of individuals and corporate entities discovered to be into cryptocurrencies and closing down their accounts, the CBN has remained firm in its anti-crypto march.
Impact of the Central Bank’s impact on the Nigerian Crypto Industry
Since the 5th of February, 2021, the cryptocurrency industry has not been the same. There have been some positive impacts and negative impacts also. However, one is left to wonder when the action of the CBN will be reversed.
Destruction of Crypto Businesses and products.
One of the ways the Central Bank of Nigeria’s prohibitions on cryptocurrency facilitation through its financial network is the destruction of businesses. Before this date, buying and selling cryptocurrencies through bank accounts was the easiest way of onboarding people into crypto.
People who wanted to buy crypto for the first time could simply purchase through their bank accounts using trusted and known crypto platforms. But with the action of the CBN, this became a challenge. Thus, businesses whose central key operation revolves around letting people buy and sell crypto using financial institutions were left hanging.
Some closed shops, others relocated to more favorable clients. The ones that were left resorted to peer-to-peer means of trading which also brought about its operation risks and difficulties.
Growth of Peer to Peer & Awareness in the use of Decentralized Technologies
While the CBN’s action was to dissuade people from using cryptocurrencies and investing in the same, like all anti-crypto actions of governments all over the world, it gave a free and massive PR to the entire Nigerian crypto industry.
As the simple way of trading cryptocurrency seems to have gone out of the window, crypto natives and newbies had to move from peer to peer. This resulted in the explosion of transaction volumes on peer-to-peer platforms serving Nigerians.
The Central Bank of Nigeria’s restriction of cryptocurrency transactions could also have influenced the adoption of Web 3 products such as Decentralized wallets and exchanges as well as tracking tools.
The Central Bank of Nigeria’s Governor, Godwin Emefiele called cryptocurrency black, opaque, and money from thin air.
There is no telling when the Central Bank of Nigeria will okay financial institutions to interact with crypto again, but as the nation’s general election draws near, cryptocurrency regulation may become one of the hottest topics among contestants who wish to win the votes of crypto natives.
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