Is Cryptocurrency Legal in Nigeria 2021
“From a private perspective, one would have thought that the CBN might not necessarily have been able to legalize BTC, but that it had reserve assets in BTC as a form of collateral against the continued devaluation of the naira. BTC has shown that it has had an annual return of 200% since it has been around for a decade. Nevertheless, its adoption, legal or illegal, has continued to increase, forcing global companies to consider it as a means of payment. Recently, Emirates Airlines joined a growing list of companies that accept BTC as payment. Bitcoin, the world`s most valuable cryptocurrency by market capitalization, rose 4.85% to $29,925, recovering from a December 2020 low of $25,400. There are a number of criticisms of cryptocurrencies in Nigeria, the most common being the link to criminal activities associated with their use. Unfortunately for law enforcement, cryptocurrencies are based on the idea of decentralization, meaning they are intentionally designed in such a way that they are not controlled by a central authority. While banks and other financial institutions in Nigeria are banned from trading cryptocurrencies, cryptocurrency is not illegal, but it is not regulated. He said: “The introduction of Bitcoin as legal tender by the Central African Republic was a big surprise to me. While I understand that decentralized currencies or cryptocurrencies will increasingly play a role in finance and payments, I don`t think the introduction of Bitcoin as legal tender will really be the answer to the Central African Republic`s economic problems. Nearly two-thirds of the 360 Nigerian cryptocurrency investors surveyed by KuCoin have used fiat currency to buy cryptocurrency on peer-to-peer exchanges. Many users rely on P2P platforms not only as a cryptocurrency entry point, but also as a tool for sending funds and participating in business transactions, according to Chainanalysis.
In April 2022, the Central African Republic became the first African country to adopt Bitcoin as its legal tender. “And currently, it is the naira that has been issued, so an unregulated alternative currency, to become legal tender, must be legitimized by amending the constitution. I haven`t seen that in Nigeria for a long time. The Central Bank of Nigeria (CBN) recently sent a letter to banks and other financial institutions in February 2021 stating that cryptocurrency trading and activation of payments for cryptocurrency exchanges are prohibited. The CBN has also asked all banks and other financial institutions to identify and delete the accounts of individuals or businesses that trade cryptocurrencies or operate cryptocurrency exchanges. The CBN claimed that cryptocurrencies are created by unregulated and unregistered companies and therefore their use in Nigeria violates existing laws as they are not legal tender. CBN also noted that the anonymity of cryptocurrencies is a major concern. CBN states that anonymity and lack of KYC make the cryptocurrency vulnerable to illegal use such as money laundering and terrorist financing. Another reason is the volatility of cryptocurrencies, which CBN says threatens the stability of other countries` financial systems.
He said: “The need for a safe and sound financial system cannot be overstated. I believe this is the reason why CBN Governor Godwin Emefiele has stressed the need for Nigeria to take an extremely cautious approach to the introduction of BTC or cryptocurrencies into the country. “If you compare that to the percentage value of the naira, you will find that it would have made sense for some of our reserve assets to have been held in a futuristic asset like BTC. This is the area I will support, but I don`t think I want Nigeria to make BTC legal tender. After the ban, Nigerians turned to P2P exchanges for their cryptocurrency transactions. While the ban is expected to limit the number of transactions made in the country and hinder crypto`s growth, Nigerians are now trading on P2P platforms such as Remita no. On P2P platforms, you don`t buy BTC with the Naira directly from the exchange, but you buy from someone else. The P2P exchange only serves as a marketplace to bring buyers and sellers closer together. The Stakeholder Chairman of the Blockchain Technology Association of Nigeria and Secretary General of the Nigeria Blockchain Industry Coordinating Committee, Senator Ihenyen, said he was shocked when the Central African Republic announced the introduction of BTC as legal tender. The World Bank had forecast that remittances to sub-Saharan Africa in 2021 would increase 6.2 percent year-on-year to $45 billion, after the pandemic was caused by the pandemic in 2020.
The Nigerian diaspora had higher disposable income due to lower spending amid the COVID-19 pandemic, which allowed them to send more money home, Jimi Ogbobine, head of consulting at Agusto Consulting Ltd. in Lagos, told Market Intelligence. This is despite the fact that the country`s central bank declared in February 2021 that the use of cryptocurrencies was “a direct violation of applicable law” and banned commercial banks from marketing them. He warned that cryptocurrency trading carries risks, including investment losses, money laundering, and terrorist financing. In Nigeria, crypto is illegal due to a ban by the Central Bank of Nigeria in February 2021. Regardless, Nigerians have continued to adopt it in transactions. I would recommend that all users, from the commercial sector to regulators, government agencies and individual cryptocurrency users, work together to ensure public safety and national security. Therefore, the focus would be on developing a practical research and development plan to help law enforcement agencies better identify and investigate illicit cryptocurrency activities. This could be achieved by: However, risks remain. In August, the central bank froze the accounts of some cryptocurrency users for allegedly drawing funds from illegal currency traders, so many companies that use cryptocurrencies are reluctant to talk about it. Even Satoshi Nakamoto, the inventor of BTC, does not expect his electronic money system to be adopted as the legal tender of any nation, including El Salvador.
Nigeria is no exception. The main idea of BTC is not to replace legal tender such as the CFA, the dollar or the naira. Rather, it is about enabling peer-to-peer transactions on any network or ecosystem that wishes to adopt it as a medium of exchange. Ogbobine has seen cryptocurrency more commonly used by Nigerians sending money out of the country to circumvent regulatory barriers aimed at stopping exits. In response to cybercrime, the use of cryptocurrency has raised global concerns about consumer privacy.
