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Nigeria’s crypto ban: Is there still space to advocate?

get.Africa
Nigeria’s crypto ban: Is there still space to advocate?
By get.Africa Weekly • Issue #55 • View online
Barka da asuba,
That’s “good morning” in Hausa
When renowned angel investor Balaji Srinivasan invested in Nigerian crypto exchange BuyCoins last year, he was making a bet on the long-term future of crypto in the country.
In 2020, BuyCoins’s user base grew by 12x and its trade volume increased by 5x to over $141m. At the start of 2021, there was no indication that the growth would slow down. 
That was until Nigeria’s central bank issued a circular advising financial institutions to close bank accounts held by crypto service providers. 
The motive
Shortly after the circular went out, the CBN issued a press release explaining the reason for its actions.
According to the apex bank:
  1. Cryptocurrencies aren’t a legal tender and are issued by unregulated and unlicensed entities.
  2. Cryptocurrencies are used for money laundering purposes and to finance terrorism.
  3. Cryptocurrencies are speculative assets where investors can lose their money due to volatility.
  4. Cryptocurrencies don’t possess intrinsic value and don’t generate returns.
Reasons that seem plausible on the surface but lose their merit when you dig deeper. 
Counter arguments
  1. Legal tender: Fiat money issued by the central bank of a country is legal tender but just because cryptocurrency isn’t ‘legal tender’ doesn’t make it illegal. This paper argues that the designation of the naira as legal tender in Nigeria does not in itself prohibit the use of any other currencies. Individuals may, at their mutual convenience, enter into transactions using currencies issued in other jurisdictions. That’s what crypto is. 
  2. Criminal activity: Fiat money is also used to do some bad things, yet no central bank has banned it. Instead, what they do is enforce AML/KYC (anti-money laundering/know your customer) compliance among financial institutions to mitigate the risk. Why not treat crypto companies like financial institutions? A blanket ban on crypto will not stop these transactions from taking place but rather push bad faith actors farther into darker, more dangerous corners. 
  3. Volatility: CBN seems to be conflating bitcoin and all cryptocurrencies. Yes, bitcoin is a speculative asset but stablecoins have emerged as an answer to this price stability problem. Why throw the baby out with the bathwater?
  4. Value: Stablecoins are also better stores of value. As for the issue of returns, the CBN is discussing crypto as a currency and as securities in the same breath. This is an indication that any policy on crypto unilaterally made by one regulator without wide consultation, not only with operators but with other regulators, will always be inadequate.
That said, the press release does make a good point. And that’s that the CBN is not alone in its thinking.
Coincidentally, lawmakers in Srinivasan’s native India are currently drafting their own bill to ban cryptocurrencies. 
In response, the local crypto community has embarked on a coordinated government advocacy campaign.  
Srinivasan himself wrote a piece titled “Why India Should Buy Bitcoin”, and it reads like an open letter to Prime Minister Modi.
Circling back to Nigeria, many of the points raised in Srinivasan’s article are applicable in the Nigerian context. Is there an appetite within the local community to launch a similar campaign or is that energy being channelled only into out-innovating the regulation?
CBN has taken a pessimistic view of crypto, but its willingness to at least issue a press release after first issuing two circulars, one in 2017 and another in 2021, seems to me like an indication that it may still have a listening ear.

get.Africa is a weekly roundup of the most interesting stories in African tech. To support, follow us on Twitter, subscribe to our YouTube channel, share this issue or send us an email. You can also check our archives.
Credit: Franco Antonio Giovanella (@francogio)
Credit: Franco Antonio Giovanella (@francogio)
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