The Central Bank of Nigeria banned Bitcoin and other cryptocurrencies on Friday 05.02.21. All banks have been ordered to immediately stop serving customers who trade Bitcoin and co- or facilitate payments to crypto exchanges.
Africa’s “Bitcoin Nation” is now experiencing a severe restriction by the central bank, which wants to stop trading BTC and all other digital currencies. In the open letter to the various banks and financial service providers, the central bank writes:
Trading cryptocurrencies or processing payments for cryptocurrency exchanges is prohibited.
All banks are urged to “identify individuals and/or companies trading cryptocurrencies or operating crypto exchanges on their platforms and ensure that such accounts are closed immediately.”
Due to this ban, the consequences are yet to be seen for the new and emerging industry in Nigeria. Will other countries possibly follow suit, and how will this affect Bitcoin in general?
Nigeria is economically the strongest country in Africa with a gross domestic product (GDP) of 448 million USD in 2019 and ranks first in the world in peer-to-peer Bitcoin trading. However, the “Bitcoin Nation” can also hold its trading volume on various crypto exchanges. It is in third place behind the USA and Russia.
In Nigeria, the peer-to-peer crypto exchanges Paxful and LocalBitcoins are top-rated. Arcane Research found that weekly trading volume doubled from $8 million to $16 million in the second quarter of last year.
Nigeria still ranks 27th globally in GDP, but the Naira (NGN) has suffered an extreme decline in value over the last 20 years. Nigeria’s fiat currency has lost about 64% against the euro since 2003. The population has long suffered from the falling purchasing power of the federal money.
The Corona pandemic has put additional strain on the country. In December, a World Bank official told the Financial Times that 15–20 million Nigerians, about 10% of the population, could be pushed into poverty by 2022. He cited the pandemic-related economic crisis as the main reason.
Bitcoin and other cryptocurrencies could put too much pressure on an already overburdened economy. The central bank is thus trying to maintain its control over its monetary policy.
Crypto companies operating in the country will have to wait and see how the ban is enforced. Binance has already suspended deposits in Nigeria for the time being in response to the open letter.
Danny Oyekan, founder of a blockchain investment firm, said that the central bank’s new guidelines “will slow down innovation.” He believes the move could affect other African countries as well. Nigeria has the largest market and is the most populous country in Africa. Oyekan also said other regulators, such as those in South Africa, are having similar discussions.
The severe tightening of regulation in Nigeria for Bitcoin and Co. will significantly impact traders and investors. The inflation of its fiat currency makes the population look for alternatives.
But currently, there are not many alternatives to bring one’s purchasing power safely into the future. Bitcoin has shown in the last 12 years that it is very well suited to escape inflation in the long run. It is not for nothing that Bitcoin is so prevalent in Nigeria. People will not let it take away their financial freedom because they don’t have many more options.
Due to the digital nature of Bitcoin, there are countless ways to trade BTC. For example, one currently popular one is buying vouchers with BTC and other cryptocurrencies for local stores and bring services.
I highly doubt the younger generation in this region will sit still at this news. The crypto community in Nigeria will not accept this abrupt halt to their recent efforts and progress. We will counter this ban with action.
In Nigeria, the fight against Bitcoin and other cryptocurrencies has begun. The central bank has identified a severe threat from decentralized digital currencies. An increase in trading Bitcoin instead of its currency weakens the central bank’s control over the medium of money.
Worldwide Bitcoin ban further away than ever before
Fortunately, many more countries around the world do not want to ban Bitcoin and Co. but regulate them like any other financial product. The USA’s development with PayPal and VISA alone clearly shows how far away we currently are from a ban.
Moreover, a ban has precisely the opposite effect in the long term. Especially if this ban is about the financial freedom of the Nigerian population. Many people live in poverty or are on the verge of it. They will do everything possible to escape it.
They will also buy bitcoin if they see fit, regardless of whether it is banned or not. This is much more than simple speculation. This is about destinies and a young and emerging country that will not let their newfound freedom be taken away.
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