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CBN New Policy On Cryptocurrency: What You Should Know - Business - Nairaland

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FG Lifts Ban On Cryptocurrency, Introduces Taxation Instead / First Bank Accepts CBN New Board As Adeduntan Resumes / CBN's New Policy On Cash Deposits: Nigerians React (2) (3) (4)

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CBN New Policy On Cryptocurrency: What You Should Know by lalasticlala(m): 8:00pm On Feb 05, 2021
This afternoon, a Central Bank of Nigeria (CBN) circular sent to commercial banks and other financial institutions surfaced online. Here is a thread explaining what the circular means and why the CBN issued it.

Cryptocurrencies have gained popularity since bitcoin, the most valuable crypto, rose significantly four years ago. The coin went from $900 in January 2017 to almost $20,000 by the end of that year.

While cryptocurrencies are known for people making (or losing) money from trading, they have many use cases, including making cross-border payments, remittances or storing wealth (protected from inflation or exchange rate depreciation).

In countries where the official fiat currency is less reliable, cryptocurrencies have gained significant popularity: cue Nigeria and its ever-weakening naira.

For many in Africa’s largest country, cryptocurrencies were a breakthrough, and in 2017, we started to see a rise in bitcoin volumes. According to one estimate, local bitcoin trades hit $1 million in a single week.

At the same time, startups started to emerge—providing different financial solutions using cryptocurrencies and their technology. One of Nigeria’s largest cryptocurrency exchanges, BuyCoins, was founded in 2017.

It wasn’t all good news, though. Bitcoin was also very popular for individuals who wanted to get involved in a Ponzi scheme called MMM (Mavrodi Mondial Moneybox).

This connection, coupled with a few fraud causes, made African governments and regulators slightly cautious. For central banks, though, the rise of cryptocurrencies was a potentially scary movement.

The idea of digital currencies that central banks have no control over were seen as a threat to conducting monetary policy.

Putting all of this together, the CBN made several warnings in 2017 about the use of cryptocurrencies. They released a circular saying that the likes of bitcoin, “ripples”, litecoin, and other cryptos were not legal tenders.

The CBN said that these cryptos were mostly used for terrorism and money laundering activities. A year later, in 2018, they “warned” Nigerians again that we would not be able to get legal help if the cryptocurrency space crumbles.

Since then, the CBN has been relatively quiet on the matter. In fact, the global cryptocurrency scene hit a rough patch in 2019 as prices crashed.

That all changed in 2020 when prices started to pick up. The world looked at crypto again, but this time, there was a more formal acceptance. Large corporations began to buy bitcoin and also invest in crypto-related startups.

In Nigeria, businesses and individuals found that cryptocurrencies could solve their woes with the naira and help them transfer money in and out of the country. Bitcoin volumes started to rise significantly.

Last year, estimates from BuyCoins showed that total volumes of bitcoin traded in Nigeria stood at $200 million per month. That’s more than what was traded on the Nigerian Stock Exchange ($131 million) in Q2’2020.

This activity boosted the space, and the gatekeepers of these volumes were the cryptocurrency exchanges. Nigerians moved from exchanging bitcoin on WhatsApp groups to more formal exchanges like Bundle and Binance.

The increase in trading activity caught the eye of ��’s financial regulator, the Securities and Exchange Commission (SEC), who announced that all crypto assets fall under its remit. It formalised cryptocurrencies as “securities” in a statement released in September 2020.

Fast forward to today, four months later, and the CBN is doing something almost contradictory to the SEC’s move. While one regulator was working on laws to formalise crypto assets, the other (CBN) is going in the other direction.


According to the circular, which was sent to banks, the apex bank said that dealing in cryptocurrencies is “prohibited”. They then asked commercial banks and financial institutions to identify and close the accounts of anyone involved in cryptocurrency exchange.

It’s not clear if this order includes individuals who use these exchanges or if it’s restricted to the owner of the exchanges. Nonetheless, the move is a blow to Nigeria’s burgeoning crypto market.

It’s early to say what the impact would be. In Nigeria, announcements like this can either be implemented instantly or quickly retracted. The worst-case scenario is that both individuals and exchanges will no longer engage in transactions using a Nigerian bank account.

The exchanges would also have to find another way of storing their cash.

��s traded over $141M worth of bitcoin on BuyCoins alone last year, and the CBN seems to be clamping down on this activity.

This will also harm the startups across Nigeria’s crypto landscape (not just the exchanges). Investors will have more reasons to be worried.

It’s very similar to how Lagos state unexpectedly banned Okadas last year.

What we have here is another policy that is trying to strangle a sector that has just started to find its feet and grow.

So why is the CBN doing this?

As we have repeated many times before, foreign exchange drives most of the CBN’s moves. This case is no different.

As the crypto market has boomed since late last year and early 2021, more and more Nigerians are exchanging their naira for cryptocurrencies ranging from bitcoin to dogecoin. What does that have to do with the CBN?

Well, individuals deposit naira on exchanges and buy these coins directly. However, these companies need to acquire dollars from mainly the parallel market to buy these cryptocurrencies on the international market.

So as more people buy crypto assets, more US dollars are being taken out of Nigeria. The pandemic and the resulting drop in oil prices has reduced the amount of dollars the CBN has in its reserves. And so it has been ruthless in restricting the use of foreign currency.


Last year, the government banned the use of foreign currency for food and fertiliser imports. In a similar vein, this new CBN circular is trying to achieve the same thing: stop Nigerians from demanding dollars to make purchases outside the country.

The problem with these restrictive policies is that they starve the real economy. When the CBN banned maize imports, prices shot up, and they had to turn back on the policy slightly.

This new policy has a similar effect in that it does more to reduce the welfare of Nigerians than anything else. Why ban the country from using an innovation that is solving many problems that the government itself created?

If investors had forgotten that Nigeria was a risky place to do business, this will be a very loud reminder. As much as a business, or even an entire sector, might look attractive on paper, its appeal is beholden to the whims of the Nigerian government.

This scenario is unfortunate. It seems that the government doesn’t mind alienating the startup ecosystem. But these real businesses solving real problems are instrumental for Nigeria’s long-term growth. Yet, the government is insistent on restricting their growth.

In today’s article, our Editor-in-Chief wondered why the CBN had been quiet recently. Little did we know that they were cooking up a concoction.

https://mobile.twitter.com/StearsBusiness/status/1357753704783478785

64 Likes 14 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by Omihanifa: 8:03pm On Feb 05, 2021
The central bank is just plainly stupid for taking this funny decision undecided

They banned it simply because they don't know how the system works.

The CBN should better wake up and embrace technology. the world is moving away from Fiat money

Ordinary dollar they can't provide sufficiently for businesses in the country now people are moving towards digital money they are getting angry.

Thesame government that can't provide jobs for the masses wants to kill the little that is putting food on the tables of Nigerians

538 Likes 44 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by Officialhorlah(m): 8:04pm On Feb 05, 2021
OKgrin
Am happy i saw this there "Yet, the government is insistent on restricting their growth."
Growth wey we no get before u con dey restrict which kain Govt be this

34 Likes 3 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by GIANTPLUSHUB: 8:08pm On Feb 05, 2021
Wahala dey naija

1 Like 1 Share

Re: CBN New Policy On Cryptocurrency: What You Should Know by elantraceey(f): 8:10pm On Feb 05, 2021
The central of bank of Nigeria..... Simple letter they cannot even type correctly. Doing everything possible to sabotage the efforts of people to earn well legitimately. Then they'll come with their 30k npower schemes that they'll still sell to people that don't need it.

200 Likes 12 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by HigherEd: 8:10pm On Feb 05, 2021
Wehrey CBN

21 Likes 3 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by grandiose4ever: 8:14pm On Feb 05, 2021
Startup Idea To Fight The Crypto Ban:

Help Nigerian small businesses and individuals open and operate suitable offshore accounts ( maybe cayman) in real time, via freemium SaaS.
We can then plug into the crypto industry, stock options without the approval from uncle CBN.


https://twitter.com/JusticeForeverH/status/1357770979389431810?s=20

15 Likes 2 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by id911(m): 8:16pm On Feb 05, 2021
This is what you get when archaic and museum object like Mohammed Buhari, a stark economic illiterate is placed in position of power. The government of Buhari and Osinbajo has inflicted so much pain on Nigerians, pain never experienced before except during the civil war and mid eighties which, incidentally was during Buhari's draconian regime. When will Nigeria stop appointing a banker as CBN Governor?

To those who voted Buhari and Osinbajo because of tribe and religion, are you enjoying their evil and wicked policies?

310 Likes 23 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by HopeVictor: 8:16pm On Feb 05, 2021
I was reading it oh..until I remembered I'm a Nigerian..while will I read such long thing that wouldn't give me money..only the stress in Nigeria is enough no need to read long write ups.. somebody should please summarize it..

29 Likes 2 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by Great100000: 8:16pm On Feb 05, 2021
Na wa for this country oooooo
Re: CBN New Policy On Cryptocurrency: What You Should Know by TheZebra: 8:17pm On Feb 05, 2021
We move, nothing scatter

7 Likes

Re: CBN New Policy On Cryptocurrency: What You Should Know by Zimzy(m): 8:21pm On Feb 05, 2021
Very educative piece of write up. Nigeria must be delivered from the Hands of the clueless and retarded. Such a policy can never revive the economy!

98 Likes 6 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by gungab(m): 8:27pm On Feb 05, 2021
Okay
Re: CBN New Policy On Cryptocurrency: What You Should Know by BOOKWORMLUX(m): 8:27pm On Feb 05, 2021
Na wa for this people o

4 Likes

Re: CBN New Policy On Cryptocurrency: What You Should Know by Twode: 8:27pm On Feb 05, 2021
I'm lazy to read this.
Pls summerize me the whole story it may be interested. cheesy

4 Likes

Re: CBN New Policy On Cryptocurrency: What You Should Know by humilitypays(m): 8:28pm On Feb 05, 2021
angry

1 Like

Re: CBN New Policy On Cryptocurrency: What You Should Know by happney65: 8:28pm On Feb 05, 2021
Funny people.. They should continue.. The aftereffect of this thing will be more than endsars when the very people they are taking a legitimate means of survival away from their hands revolt in one way or the other. they should not worry..very soon na online vendors they will come and attack..

20 Likes 6 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by magicminister: 8:28pm On Feb 05, 2021
You have to be really dense to not know this is their response to the end sars protest.


November last year, CBN banned all direct transfers to Nigerian bank accounts from outside the country. You can recieve money but not more than $5000 and not directly to your bank account, you’d need to go to the bank, provide ID and recieve in Cash.

Now, CBN banner crypto. Remember during the protest, after bank transfers were banned from sites like flutter wave, the people switched to crypto! Now the crypto is gone, people died and the protest is looking like it was for nothing!

82 Likes 7 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by Nobody: 8:28pm On Feb 05, 2021
Audiocurrency they meant

1 Like

Re: CBN New Policy On Cryptocurrency: What You Should Know by AzuNas: 8:28pm On Feb 05, 2021
Alright. . . . . . .Ajie
Re: CBN New Policy On Cryptocurrency: What You Should Know by merits(m): 8:28pm On Feb 05, 2021

1 Like 1 Share

Re: CBN New Policy On Cryptocurrency: What You Should Know by Barbsamiin: 8:28pm On Feb 05, 2021
How could this happen? make we move to neighbouring countries open bank account use it and buy our crypto there.

1 Like

Re: CBN New Policy On Cryptocurrency: What You Should Know by Sailor1: 8:29pm On Feb 05, 2021
I see this as a waste of time but CBN. Western countries and even China once tried it and all finally succumbed. Now they've moved from putting a ban to making sure folks pay tax on profits made.
The EU and China are also working on their officially floated crypt0 coins.

Money just like water will always find its level. If the CBN does not know that yet, this move will prove it to them.
When they introduced policies that made sure government officials (more so CBN officials) roundtripped the dollar and devalued the naira, when they give millions of scarce foreign exchange at a discount for pilgrimage and when the president demarkets Nigeria they did not know all that will devalue the Naira

That said, it is a shame that though crypto in Nigeria is still at its infancy, it has surpassed our local stock market. Money will always find its level. How will our stock market thrive when it is full of corruption and insider trading. Most folks who bought Nigerian stocks in 2007 boom are yet to recover their base capital over 13 years after without even adding the effect of devaluation. Meanwhile, even if you bought bitc0in at its peak of 20k USD in 2017, today, you are 100% in profit. That is just in USD. In naira, you are over 200% in profit when you factor devaluation of the naira.

Money will always find its way. Crypt0 stable coins pegged to the dollar helped alot of folks escape the effect of incessant naira devaluation.

Folks interested should join the crypt0 discussion on its official Nairaland thread

https://www.nairaland.com/6318352/crypto-currency-investors-thread/96#down

102 Likes 9 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by Simplebeauty: 8:29pm On Feb 05, 2021
undecided
Re: CBN New Policy On Cryptocurrency: What You Should Know by wwwtortoise(m): 8:29pm On Feb 05, 2021
The Nigerian government is anti-people.
Whatever benefits the populace give them sleepless night.

Crypto is here to stay as no policy can stop this technology. China tried to control it but failed.

58 Likes 4 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by Hinokami: 8:29pm On Feb 05, 2021
What is this rubbish of an excuse to justify what the Central Bank is doing?

We dont need this explanation..do they have to use draconian methods?

Classless government...Instead of Innovating, they go the other way sending us back to the stone age.

21 Likes 3 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by casppyjay: 8:29pm On Feb 05, 2021
lalasticlala:


https://mobile.twitter.com/StearsBusiness/status/1357753704783478785
I know it will be counterproductive even if it’s a step In the right direction but we can’t use caffeine products for patients allergic to caffeine.. only people with high IQ can comment and understand..

2 Likes 3 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by slawormiir: 8:29pm On Feb 05, 2021
Damnnn niggarrrr.
Mumu cbn
We go dey do Ptpt
If you are a niggarrrr and you understand what I meant by ptpt then you must be a real niggarr

70 Likes 9 Shares

Re: CBN New Policy On Cryptocurrency: What You Should Know by Samade7: 8:29pm On Feb 05, 2021
Very useless FG.

5 Likes 3 Shares

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