Nigeria bans cryptocurrency trading in the country

While most countries, institutions and individuals around the world are cautiously waiting and welcoming the crypto revolution, there are some who believe that it could do more harm than good, and so are proactively looking to ban its trading in their economies. India is one such country, which is exploring banning crypto trading, while Nigeria has already done so, based on a government circular from a few days ago.

According to this, the Central Bank of Nigeria ordered financial institutions in the country to identify people and companies which are trading in crypto in the country, and close their accounts as soon as possible. It also threatened severe penalties for those institutions that did not comply with this order. This has come as a sudden change in bank policy in the country, and therefore a shock to most people, since crypto is one of the safest and speed payment methods. Also there are various sectors in Nigeria, not least the various online businesses which had begun utilizing crypto to improve their customers’ experience. One of the best examples of this was seen in the online gambling sector, which was experiencing a boom in any case due to the pandemic. This was improved even further when various online gambling providers began offering players the option to play bitcoin jackpot slots, and also using the underlying blockchain to strengthen their operations. Such websites have seen a lot more traffic and revenue increases since implementing these features, but this ban will now take away a significant client base, given that Nigerians have always been very fond of gambling.

One of the biggest questions around this ban is that crypto is supposed to be above regulations, since they are decentralized, so how exactly is it being banned in Nigeria, or indeed anywhere else. The point is that it is not crypto exactly which has been restricted – rather, the institutions and exchanges where people can trade in these assets are being ordered to close accounts. Thus, the network itself is being shut, which makes it impossible for users in Nigeria to be able to trade in crypto. It is similar to the way in which the Central Bank of Nigeria controls the financial system for any asset.

There has been no reason cited for this ban, but most observers believe it is to stop the flight of capital into crypto, and therefore away from the domestic fiat currency, which would weaken the currency. The naira, Nigeria’s currency, has been in free-fall for a number of years, and this flight of money into the dollar and now cryptocurrencies has only been worsening this trend. Thus, many Nigerians had been moving towards crypto as an alternative to receiving foreign remittances, which was taking away a source of foreign currency for the central bank. In fact, if the various remittance figures that different crypto exchanges put out are to be believed, there were transactions made for over $1.5 billion in crypto in the country last year, which is a significant amount. Another reason is the use of crypto during the anti-government protests in Nigeria, which allowed protesters to bypass local funding restrictions.

However, it is important that this decision does not yet make it a crime for people to own crypto – it only makes it extremely difficult to do so. Thus, we can expect more and more citizens to try and find innovative ways to trade and own crypto in Nigeria, as its benefits have already been seen, and there is an appetite for digital currencies that is not going to go away anytime soon.