The Central Bank of Nigeria or CBN, put out a letter stating that all the banks in Nigeria that have anything to do with cryptocurrency should stop whatever it is they are doing with them, and no transaction involving crypto currency should occur. In this article. I will be analyzing the letter they sent, the previous 2017 letter sent by the CBN, the stance of the SEC and general thoughts and predictions of how this might turn out.
Its almost as if theyliterally woke up and decided to shutit down overnight, but thats. Not thecase Lets go back in time a bit. The first circular on Cryptocurrency by the CBNwas a letter in 2017, which they referred to cryptocurrency as Virtual Currencies, The concernof the CBN was that Crypto is untraceable anonymous and hence can be used by criminalsto, launder money and finance terrorism.
They were also concerned that the nature isVirtual currency is also unregulated. All over theworld and people may lose their money without anylegal redress or solution to get that money back, especially if crypto companies closedown their business.
Which would havebeen true in the past, but now many cryptoservices now have authentication methodshowever, because crypto is untraceable. If you sendto the wrong wallet, you might not get it back. In this same letter, the CBN asked that banks donot use hold trade and/or transact in anywayin virtual currencies. They also asked that ifbanks have any customers that are trading crypto. They should make sure the customers are, verifiedand are not Money Launderers or TerrorismFinanciers, and if they find out that they are, they should discontinue their relationshipwith them and report them to the NigerianFinancial Intelligence Unit. ( NFIU ) Immediately
The last line of the letterwas that Bitcoin Ripple, Litecoin and other or any form of crypto is NOTlegal tender in Nigeria, meaning that its notmoney and any bank of person transactingwith it are doing so at their own risk.
The SEC, which is the Security and ExchangeCommission in Nigeria, whose main duty is toregulate investments and securities in Nigeriasort of gave cryptocurrency some legitimacyalthough not directly. It called crypto currencyan asset, A digital asset. In fact, in theirworlds they said that the position of the SECis that virtual crypto assets are securitiesunless proven otherwise Their whole pointwas to regulate crypto currency and any personindividual or corporate who is involved. Withany aspect of blockchain related activities.They required that if anyone wants to tradecrypto, they may have to establish a branchoffice within Nigeria.
One thing that theyalso landed on, though, like the CBN is that crypto, is NOT legal tender, aka, crypto, is not real money in simple terms, All of this was, as at September of 2020 and Ill leave alink to the full breakdown if youre interested. All of that brings us to today, where the CBN issued a letter in February of 2021 that dealing in Bitcoin or any crypto currency for that matter by banks is prohibited or in other wordsits, been banned, forbidden and, dare I say, illegalnow Any commercial bank that breaches by the Cbn will face severe regulatorysanctions aka. We will seize your licenseif. You try be involved with crypto currency The last. Statement in this letter is that the banksdont have anytime to sort their affairs andthis directive or rule is with immediate effectso starting the second, the letter goespublic no bank should deal in crypto
More details also came out about how the FBItipped the CBN, that some Nigerians were usingbitcoin to target stimulus, packagesfrom, the US and the west in bitcoin. This was on the front page of ThisDay Newspaper Infact and on a minor note, the first letterwe saw was sort of confusing and full ofspelling mistakes. They wrote Central of Bankof Nigeria and they also spelled public as pubicwhich made. Some people think it wasa hoax, but unfortunately it wasnt.They corrected it and linkedin on the CBN website.
All of us Nigerians know we mostlyhave to use a Nigerian bank account.
These cryptocurrency apps needed to integratewith a Nigerian bank as a partner, so we caneasily trade, (, I.e, buy and sell crypto and have aNigerian account to transfer to and from ) This wasgoing smoothly. In fact, according to a Quartzarticle Nigeria, in the last 5 years, Nigeriahas traded over 60,000 bitcoin or 566 milliondollars, which is second only to the US on Paxful. Not just that, though, there was a reportby Stears that Nigeria traded as highas $ 200 million dollars in Bitcoinper month aka over 95 billion Nairaway more than the Nigerian Stock Exchange did inthe span of 3 months in the 2nd quarter of 2020.That is crazy. The BuyCoins CEO on Medium statedthat in Nigeria they traded more than $ 141 milliondollars in 2020 alone, thats over 67 billionNaira. Similarly, BitSika on Twitter posted thatthey, also transacted over $ 39 million dollars. Ofwhich Nigerians deposited $ 18 million dollars, thats a total of almost $ 200 million dollarsin a year and thats just 2 companies
If you look at these letters and all thatshappened, the CBN is most likely worriedabout 2 things. One is Fraud. Nigeria is kind ofinfamous for the word, 419 theres, the case ofa certain hushpuppy and the quote: unquote yahooboys. The argument of the CBN could be that theyare trying to prevent fraud, money laundering, andterrorism financing, and they are right. However, the other way to have looked at this would bestrategic These companies like Quidax as Imentioned. In that $ 10,000 video have limits towhat. You can and cannot do on the app you canteven send any money unless you have your BVN, which is a highly traceable number in our bankingsystem
The highest limit you can even sendis $ 40,000 per day, and for that you would needto, submit tons of Identification documents, andeven a proof of residence which they would vet.
The other is the reason which would have made CBNban Bitcoin is the strain on foreign exchange.The. Cbn has been making a lot of moves to helpthe Naira and stop more US dollars from leavingNigeria. So last year they banned the useof dollars for food and fertilizer imports. They reduced the spending limit on many many Nairacards. I think the limit is like $ 100 per day recently as well. Services like Transfer Wisewhich, I use to receive money. Sometimes fromdollar to Naira has stopped working to be fair. The exchange rate was quite bad. I did receive wayless value for my dollar received and the CBNpolicy is that Nigerians receive their dollardirectly in USD cash or in a Dollar Account basedin. Nigeria AKA a Domiciliary account
Theresalso a letter for that which Ill leave in thedescription below as well
Essentially, they didand are doing anything that stops Nigerians fromdemanding dollars to buy things from outside thecountry, Which, from their perspective, makes senseto at least help the Naira not lose its value Now, moving back to Crypto the way these appsworked was that you had the cryptocurrencytrading and exchange Platform, thats thecompany themselves, Then in between is thebank powering them, with a Virtual Account thatoperates exactly like a Nigerian account. Whichwould help you deposit money to buy cryptoor receive money when you sell crypto
Onemajor bank that does this is Providus Bank andkeep, this name in mind as well revisit soon
Immediately that announcement was made cryptocurrency companies like Quidax, BuyCoins, Binance Patricia and the likes have issued similarstatements. They mostly mentioned that nowyou cannot fund your account with Naira anymore.What. This simply means is that Nigerians cannotbuy Bitcoin with their Naira, so you would onlyhave to trade with someone. You know who alreadyhas bitcoin one on one. However, you can stilltrade on most of these platforms. You can withdrawbut, it would be slower and it would bea bit tedious to buy bitcoin right now, Following this as well. A lot of apps, likePiggyVest and Cowrywise that help people savemoney couldnt use their Virtual Accounts.
These virtual accounts were provided byProvidus Bank who currently hosts a lot of virtualaccounts on these apps PiggyVest, had to switchto Wema Bank over the weekend to power. Theirvirtual Nigerian bank accounts on their platformimmediately
Even before these letters, companieslike Rubies couldnt even have their customersdebit or withdraw their cash, Which is allhappening togather, Like one giant Orchestra.
I most definitely may bewrong, but its almost as ifits the fintech start. Ups in generalthat are going through all these andthe companies powering them as well theyare in a really rough spot right now, Whoop thats just a lot to unpack Whats the way forward. Whats going to happen, How do we move from here?
As I speak, Im suremany things will change and be updated from thedate. This video is published. So if you haventdo subscribe to this channel and follow me onTwitter @ fosudo Ill be sharing any update. I get
One thing is for sure: Nigerianswill find a way around this, going back to the roots of trading bitcoin byP2P or Peer to Peer trading with individualson platforms that power it Right. Nowon. Almost all these platforms, you areable, to send and receive bitcoininto your wallet so youre covered. Also speaking of solutions, If youre afreelancer, who mainly receives foreign exchange or you still want to keep trading bitcoinand/or, just want to secure your finances, work on creating a Domiciliary account inNigeria
Most of them would usually need2 guarantors, who hold current accountsin commercial banks. The CBN is tryingto, protect the USD and they dont have anythingagainst domiciliary accounts. As far as we know, Next up Create an account onPayoneer Im, not sponsored by them. Theyll give you a US checking. Accountand, you can send direct dollar creditto. Your USD Domicilliary account herein Nigeria. This is a major solution. It might take some time to implement for you butits one of the best solutions to these things, Thats pretty much it guys. What are your thoughtsabout whats going on?
Would you say the CBN wasright by doing this, Could they have donesomething better? Just let me know what yourthoughts are in the description.