. CBN’s order hasty, say dealers, Nigerians
. Citizens traded 60, 215 Bitcoin worth over $566m in five years
. Nigeria is world’s second largest Bitcoin market after US
Following Friday’s ban on crytocurrency transactions in Nigeria by the Central Bank of Nigeria, many of the firms providing the digital currency services in Nigeria may have begun moves to migrate their investments out of the country to friendlier climes, an action that may result in Nigeria losing financial investments worth about N6trillion, FirstNews Online investigations have revealed.
CBN had on Friday issued an order shutting down cryptocurrency buying and selling amongst Nigerians, and directed all banking institutions to close the accounts of customers with cryptocurrency transactions immediately.
The apex bank had further warned the banks that breaches of its directive on the ban on cryptocurrency transactions in the country would attract severe regulatory sanctions.
But FirstNews investigations further revealed that Nigeria has the world’s second-largest Bitcoin trading volume.
It was gathered that in the last five years Nigerians have traded 60,215 Bitcoin, worth more than $566 million, making the country the second largest digital currency market worldwide after the United States.
Trade in Bitcoin also surged the highest — volume (20,504.50) — in 2020.
FirstNews findings, however, revealed that some cryptocurrency exchanges have begun to consider migrating their companies’ investments in the global digital currency business to other crypto-friendly jurisdictions.
As part of the first step towards achieving the migration of their investments, FirstNews gathered, the cryptocurrency firms have deactivated Naira deposits and Naira withdrawals from their exchanges.
This, it was learnt, was to minimise their losses following the CBN ban on the digital currency transactions in Nigeria.
Confirming FirstNews’ findings, a financial analyst and assets management expert, Mr David Osazua, said Nigeria could suffer losses far in excess of the N6trillion loss in investments projected, if the Bitcoin companies and operators are eventually allowed to migrate their business to other countries due to the CBN ban on their operations.
Osazua, therefore, urged the apex bank to review the ban and rather create a better regulatory framework that could checkmate the operators and banks in general.
He pointed out that with Nigeria as the second largest Bitcoin market worldwide after the United States, the country would suffer monumental financial loss if the cryptocurrency exchanges are booted out of the country.
Meanwhile, the recent ban on digital currency, otherwise known as cryptocurrency, has continued to generate reactions as many Nigerians, especially dealers, have condemned the directive of the CBN, which they considered as hasty.
Many analysts say the outright ban on Naira-backed cryptocurrency trading would significantly restrict the potential growth of Nigeria’s burgeoning cryptocurrency industry, which accounts for the world’s second-largest Bitcoin trading volume and the 8th country with the highest adoption of cryptocurrency in the world.
Although the rationale behind the CBN decision is yet unknown, there are indications that it may not be unconnected with foreign currency controls and the 97 per cent drop in remittances through official channels, between January 2020 and September 2020.
Notwithstanding the justification, the hasty manner with with which the decision was reached, particularly without an attempt to engage the industry, analysts have argued, was unbecoming of a regulator of the financial industry.
Market pundits believe that the CBN’s power to regulate the activities of financial institutions is being wielded capriciously to abort what has been described as the future of the global financial industry.
“In an age of globalisation, it will not be long before the country loses the opportunity to establish leadership in the regulation of cryptocurrency,” an analyst said.
Also commenting on the development, a lawyer and associate within the Corporate Finance and Capital Market of SPA Ajibade & Co, Olayanju Phillips, said a better approach might have been to utilise its recently created regulatory sandbox for the payments system to understudy the use cases of cryptocurrency within the system.
“Alternatively, the CBN may have developed a regulatory sandbox specifically for cryptocurrency innovations. This would have afforded the CBN a better opportunity to understand the risks and more so, the opportunities for the country to explore the industry,” Phillips said.
Founder and Chief Executive Officer of cryptocurrency exchange, Binance, Changpeng Zhao, said it would affect naira deposits and withdrawals.
The Binance CEO advised the withdrawal of Naira to avoid potential channel issues.
For crypto traders in the country, the CBN latest directive means transactions would no longer be possible on third party applications. The game would likely move to Peer-to-Peer trading (P2P), where two people interact directly with each other to buy or sell cryptocurrency. This is, however, susceptible to fraud as transactions can only be conducted based on trust.
A Peer-to-Peer exchange such as Binance enables sellers and buyers to find the right person, in the right place, at the right time and make a trade at the right price, using the payment method that works for both.
“For the CBN, it has a lot to worry about. The growing popularity of cryptocurrency, amid preference for storing money in digital currencies rather than the banks, and with remittances falling because of crypto alternatives, further exacerbating FX pressure in the country. Also, the idea of digital currencies that the CBN has no control over was seen as a relative threat to conducting its monetary policy,” a cryptocurrency trader, Mr Abutech David, said.
Also reacting to the ban, former Minister of Education, Oby Ezekwesili, slammed the CBN, saying the order made the country appear unprepared to embrace the future.
She tweeted, “Frankly, CBN, all you needed to do was map all the legitimate risks associated with #cryptocurrency and gather a subset of the super brilliant Nigerian young minds in #FinTech so you listen and learn more. Learning is the greatest asset of the policy-maker. “Our country’s DNA for irony is uncanny. At the same moment, as we celebrate one of our own leading a global trade institution, we have a memo from our Central Bank making country appear unprepared to embrace the future.”
Ben Murray-Bruce, a former senator representing Bayelsa East, said, “I thought it’s universal knowledge that decisions or policy regarding finance or economy should never be hasty?”
Shehu Sani, a former senator, who represented Kaduna Central, tweeted: “Why the ban on cryptocurrency? Why are we running backwards?”
Head of Public Relations at analytics firm, Buffalo Chase, Ekene Ojieh, said, “It’s easy for a young country like Nigeria to adopt the use of Bitcoin because a large percentage of its population falls within the age range that is tech-savvy. Although that’s not the only reason why many Nigerian youths adopt Bitcoin.”
He noted that Nigerian youths prefer to secure their assets in Bitcoin or stable coins because Naira like every other fiat currency, is susceptible to inflation.