Restrictions on crypto in Nigeria could lead to problems

One of the biggest bits of news in the crypto space to emerge over the last month or so came from Nigeria, where the country’s central bank introduced a ban on cryptocurrency trading.

This came as quite a shock to the crypto sector, since Nigeria has been one of the biggest adopters of crypto globally. This ban is therefore set to create havoc in the crypto ecosystem in the country, both in the short-term and long-term.

The circular from the Central Bank of Nigeria (CBN) was a reminder for financial institutions in Nigeria that they are prohibited from facilitating businesses which are involved in cryptocurrency transactions, thereby effectively banning crypto transactions.

Institutions were ordered to close accounts which have continued crypto trading, with severe penalties for non-compliance. This has come as quite a surprise, given the popularity that crypto trading has in Nigeria. One of the biggest reasons for this was the strict foreign exchange policy adopted by the central bank.

The decline of the naira (Nigeria’s fiat currency) also made holding assets such as Bitcoin more attractive for Nigerians. The central bank’s policies have made dollars extremely scarce as well, which is another reason for the rise in popularity of Bitcoin and other crypto tokens.

This is not exclusive to Nigeria – other African countries with similar policies, such as Zimbabwe for example, have seen similar trends with regard to crypto adoption.

Bitcoin’s popularity has also been aided by the rise of online gambling in the country, where cryptocurrencies are now used as well to place bets, which has made them even more popular. Crypto gambling with its exciting history has helped improve the prospects for the crypto sector in Nigeria, as it has provided users with an option to spend their crypto tokens.

Thus, the impact of this ban will be felt across various sectors in the country. Another reason why this ban could have been enacted is to ensure that citizens cannot receive foreign remittances despite them being restricted, as was seen last year during the #EndSARS protests, where protesters were able to receive money in the form of Bitcoin from abroad, despite their bank accounts being frozen by the government.

This is not a completely new development though – back in 2017, the CBN had banned the provision of services to crypto exchanges by financial institutions. However, customer exchanges were still allowed, which meant that crypto trading could still take place.

This latest directive, however, makes it completely illegal to have any sort of crypto activity taking place. Even though cryptocurrencies are decentralized, and therefore cannot be controlled by a single entity, they can be restricted by shutting down access to exchanges and networks, which is what the Nigerian central bank is doing.

According to some reports, crypto transactions worth over $1.5 billion were carried out in Nigeria in just the last year, which shows how the country has been one of the biggest markets for crypto globally.

Thus, the impact of this ban will be felt by the entire crypto market, with demand for Bitcoin and other tokens being hit as a result. There has already been opposition to this order in Nigeria, with a group of senators asking the central bank to explain its reasoning for this development.

However, the country’s securities regulator has endorsed this move, as have several other senators, and the fear is that other African countries where crypto is popular, such as South Africa, Kenya and Ghana, to name a few, could follow suit.

Crypto has been facing a lot of restrictions at a global level ever since its creation, and this is just another example of central banks all over the world trying to regulate cryptocurrencies before they can become large enough to threaten the existing fiat currency system.