Why CBN Bans Banks from Facilitating Cryptocurrency Exchanges

From Facebook to Twitter, influencers, cryptocurrency traders and interested stakeholders have hinged CBN’s cryptocurrency ban on lack of knowledge of the blockchain technology or the crypto space.

Meanwhile, it was the peculiarities of the Nigerian economy that necessitate CBN’s intervention in the crypto space.

The CBN is looking to revive the economy, create new jobs, deepen productivities and generally broaden growth.

However, the amount of money flowing into the crypto space at the expense of Nigeria’s real sector is weighing on the nation’s economic recovery and disrupting CBN strategies.

Nigeria’s investors that are being forced to invest in the real sector suddenly started dumping money on cryptocurrencies due to the ongoing bullish run.

The CBN needs all help it can get to curb capital outflow and improve the economy, not build Bitcoin or other cryptocurrencies created by foreign entities.

Dollar scarcity and the continuous plunge in Naira value despite CBN efforts is partly because of scarcity created by firms like cryptocurrency exchanges that buys and sells dollar at black market rates.

They are part of the reasons the black market thrives despite efforts to curtail their activities. They create forex scarcity given the fact that they added to manufacturers and other importers struggling to access dollars in that section of the forex.

Also, the data that is coming from the crypto exchanges shows Nigeria’s crypto transaction volume is more than the equities market even with the equities market gaining 50.03 percent in 2020.

Busha said it recorded $219,208,193 in transaction volume in 2020 while BuyCoins did $141,395,605.75.

Bitsika that deals in cryptocurrency and payments said it processed a total of $39,953,115 in transactions.

Luno, Remitano, Binance, Paxful and others are yet to release their numbers. Meaning, crypto volume could more than double the Nigerian Stock Exchange trading volume for the year.

In fact, a report from UsefulTulips revealed that Nigerians transacted $32.3 million worth of Bitcoin in October 2020 alone. While Paxful has said Nigeria’s traded 60,215 Bitcoins worth over $566 million in the last five years on its platform, this excludes Ethereum and other cryptocurrencies.

According to Statista, “Nigeria’s interest in Bitcoins reached a peak during the summer of 2020, reaching the highest level since early 2018. This conclusion reveals itself after investigating Bitcoin trading volume against domestic currencies used for the transaction of the virtual currency. The African country was said to be one of the three countries with the most Bitcoin trading in the world in 2020.”

It indicates that without cryptocurrency trading investments in the real sector or the Nigerian Stock Exchange could have grown more.

It is the same with the real sector, as long as investors have options with better-projected returns they won’t care about the real sector.

People that are saying businesses will die, how many cryptocurrency exchange firms are in Nigeria? Less than 30, compared that to the millions of businesses dying because of bankruptcy and poor economic productivity. What about the rising unemployment rate due to weak industries?

Also, do not forget that cryptocurrency traders/investors do not pay taxes, therefore, FG generates nothing from it, yet it keeps hurting its strategies and economic productivity at large.

All these coupled with the fact that the crypto space is not regulated and a slight policy adjustment in the U.S or other top trading nations could plunge the entire industry into disaster and millions of Nigerians into poverty rank, are the reasons the CBN moves to curb its excesses.