CBN vs Crypto in Nigeria: The End and the Beginning

I was working at a cryptocurrency exchange when the first round of Nigeria’s central bank’s circulars regarding bitcoin dropped. I wrote about the circulars for Ventures Africa then.

2017/2018 Circulars

These circulars came on the backdrop of the sporadic rise in the price of bitcoin in 2017 and Nigeria’s bitcoin trading volume rising to one of the biggest then.

However, as you can see most crypto exchanges survived those periods, including the one I was working for.

Fast-forward to 2021, bitcoin just finished having one of the biggest jolly rides in many years, and CBN is back at it. Must be a coincidence.

To be clear though, as against what most online news media are reporting, the central bank of Nigeria didn’t ban cryptocurrencies or the trading of cryptocurrencies. It only restricted the financial institution under it like banks and other payment processors from servicing cryptocurrency exchanges or people directly involved with providing crypto services.

No, Pulse, CBN didn’t ban cryptocurrency trading in Nigeria.

Cryptocurrencies were created in the first place to allow individuals access to financial services without the need for a centralised authority. Bitcoin was created as a peer-to-peer electronic cash system. That means you and I can transfer bitcoin to one another, without the middleman.

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution,” as stated in Bitcoin’s whitepaper.

Although centralised exchanges, a place where a business acts as the middleman for buying and selling crypto, is the norm these days, that wasn’t the original intention. But they allowed everyday people easy access to buy, sell and own bitcoins and should be credited for making crypto a mainstream phenomenom.

Yes, this CBN directive would hit the centralised exchanges hard. The most popular centralised exchanges in Nigeria are Quidax, Luno, Buycoins, Trove, Bundle and everyone who accepts Naira deposits and withdrawals. But it could be a boom for Peer-to-Peer (P2P) exchanges (subscribe to get a review of the P2P exchanges in Nigeria and around the world).

In July 2018, for example, the Reserve Bank of India (RBI) gave a three-month window to banks and other RBI-regulated institutions to wind up relationships with firms or individuals dealing in cryptocurrencies. This is not dissimilar to what Nigeria’s apex bank put out right?

What happened next in India?

One of the country’s oldest crypto exchange, Zebpay, announced on 27th September 2018 that it was shutting down. Though it continued to provide crypto wallet services. So, expect some centralised crypto exchanges in Nigeria to also shut down (watch your money).

However, “from August, we are seeing an uptick in the number of people signing up on the platform and transacting. We saw about 9,000 sign-ups last month alone, and most of these people are the ones who have never transacted in crypto before. Usually about 40-50% of the new sign-ups complete a trade after signing up," said Nischal Shetty, founder and CEO of WazirX, an exchange that introduced P2P transactions in July after India’s central bank’s regulation.

In summary, some centralised exchanges would go down while some would stay up, new P2P and decentralised exchanges (DEX) would be born to capitalise on this development. DEX is the future.

New models of buying and selling crypto would rise and the decentralisation movement shall continue. We Meuvvee!