Nigerians are starting to view cryptocurrencies as a more effective way to maintain the value of their money. This is because constant inflation has caused the value of the naira to decline.
The Naira has consistently proven to be a poor choice for wealth storage. As a result, many Nigerians have turned to investing in cryptocurrencies, which, despite their volatility, have made those with sufficient knowledge of the encrypted digital currency millionaires.
The most prominent complaint about cryptocurrencies in Nigeria is their connection to criminal activity. However, there are other criticisms as well. Unfortunately for law enforcement authorities, cryptocurrencies were created with the principle of decentralization in mind, meaning they were purposefully created to be immune to centralized control.
Cryptocurrency trading is not illegal, but it is unregulated in Nigeria, where it is prohibited for banks and other financial organizations.
Nigeria leads in Bitcoin P2P transactions
Nigeria uses more bitcoin for peer-to-peer transactions than the entire rest of Africa combined, according to data compiled by Usefultulips, a Bitcoin analytics firm. For instance, Kenya, its closest rival in P2P BTC transactions, had transactions worth $84.3 million during the previous 180 days. The sum in Ghana was $59.8 million.
Despite the Nigerian Central Bank’s ban on cryptocurrencies, many young Nigerians embrace bitcoin. In reality, peer-to-peer bitcoin trading has increased to $204 million since the beginning of 2021, the highest sum in Africa.
A major shock to the bitcoin industry was the Nigerian regulators’ ban on banks in February 2021. Despite the recent shift in the market’s sentiment from bullish to bearish, Nigerians have instead increased their use and depth of knowledge, as seen by the number of platforms offering alternative funding methods.
Data compiled by Binance revealed that the number of P2P users for the company in Africa increased by a staggering 2,228.21% between January and April. Unsurprisingly, Nigeria had a significant impact. Additional well-known cryptocurrency companies, including Paxful and Crypto.com, are joining the fray. Due to the country’s banks’ being prohibited from conducting cryptocurrency transactions, P2P transactions have increased dramatically.
What’s the current regulation of crypto in Nigeria?
Nigeria’s capital markets regulatory agency has published new legislation governing the country’s issuance, trade, and custody of digital assets. According to the Securities and Exchange Commission (SEC) of Nigeria and the Central Bank of Nigeria (CBN), Nigerian financial institutions are prohibited from conducting business with organisations associated with cryptocurrencies.
The new SEC regulations, however, mandate that token issuance platforms and exchanges create trust accounts with receiving institutions. The SEC regulated digital assets as securities in the 54-page document, specifying registration requirements for custodians and offers of those assets.
Thanks to licenses obtained by the SEC, virtual asset service providers (VASPs) are now permitted to operate in Nigeria. VASPs must also follow anti-money laundering and countering the financing of terrorism (AML/CFT) guidelines.
As a result of the mass selling of risky investments caused by worries about skyrocketing inflation and rising interest rates, crypto assets have also been affected in other places. However, they are starting to level off now.
However, the nation’s young, tech-savvy population has enthusiastically embraced cryptocurrencies, using peer-to-peer trading provided by cryptocurrency exchanges as one way to get around the financial sector prohibition, despite the Nigerian government’s introducing its own digital asset known as the eNaira.
A bright crypto future for Nigeria
As more people register on cryptocurrency platforms for peer-to-peer payments and trade, the number of people in Nigeria who own and use digital assets will increase. Despite the CBN’s restrictions and the apex bank’s persistent drumbeat, this is because of the significant risks associated with cryptocurrencies.
In reality, a different study by Chainalysis revealed that between March 2021 and February 2021, when the CBN banned cryptocurrencies, “the dollar volume of cryptocurrencies transmitted from Nigeria surged to $132 million, up 17% from the previous month.” This demonstrates the degree of social acceptance of cryptocurrencies for peer-to-peer payments (P2P) and remittances, an important aspect of the evolution of money.
Given that it provides a quicker and more affordable answer to Nigeria’s remittance difficulties, cryptocurrency may serve as the foundation for most cross-border payments in Nigeria. A trader in Nigeria can send money in a matter of seconds via cryptocurrencies as opposed to the Society of Worldwide Interbank Financial Telecommunications (SWIFT), which is not regarded as user-friendly or appropriate for business use.
