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Nigeria’s Crypto Ban Fuels Mistrust in Government

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Nigeria’s Crypto Ban Fuels Mistrust in Government

A central bank ban on crypto transactions is at odds with the government’s goal to build a digital economy around blockchain technology.

Nigeria is committed to building its digital economy, but the central bank’s recent cryptocurrency prohibition counteracts this goal and fuels mistrust of the government.

“Governments and businesses all over the world are realizing the powerful potential usability of blockchain… Nigeria, however, is lagging due to the government institutions’ sore-footedness and refractory approach to this undeniably ingenious innovation.”

So states the draft National Blockchain Adoption Strategy released by Nigeria’s National Information Technology Development Agency (NITDA) in October 2020. The strategy makes the case for Nigeria’s adoption of blockchain technology, including digital currencies, to build a digital economy.

Yet, on February 5, many Nigerians were surprised and angered when the Central Bank of Nigeria (CBN) announced a ban on the exchange of cryptocurrency by financial institutions and directed banks to close accounts trading in crypto.

Although CBN said its policy is a reiteration of a 2017 circular warning financial institutions about virtual currencies’ risks, this announcement is at odds with its efforts toward digital transformation. Following the announcement, the Security and Exchange Commission (SEC) paused its regulatory review of crypto pending CBN clarification. Meanwhile, the Senate has invited the heads of CBN and the SEC to brief them on this decision.

As oil prices tumbled in 2020, taking Nigeria’s forex reserves and the value of the Naira with them, Nigeria entered a recession, and inflation stood at nearly 16% as of December. CBN has pursued several avenues for increasing forex liquidity in Nigeria, including requiring International Money Transfer Operators to distribute remittances in USD instead of Naira, cracking down on exporters who do not repatriate revenue, and restricting the use of forex for some imports.

Restrictions on foreign spending have led some banks to limit monthly foreign transactions to as low as $100 a month. Direct remittances to Nigeria also dropped over 97% between January to September 2020, increasing the squeeze on forex.

CBN devalued the Naira twice last year, and the high cost of moving money into Nigeria has led Nigerians to seek alternatives through cryptocurrency. Nigeria is the world’s second-largest peer-to-peer (P2P) bitcoin market and the largest in Africa. Crypto trading, which totaled $566 million from 2015-2020, has increased yearly since 2015, with a jump of 30% in 2020.

“The high cost moving money into Nigeria has led Nigerians to Seek alternatives through cryptocurrency.”

Driving the crypto market’s growth is users tapping into crypto as a payment, investment, and trading tool amid increasing difficulties in accessing forex and the desire to hedge the value of funds. While the COVID-19 pandemic likely plays a significant role in the remittance decline, members of the diaspora are increasingly turning to cryptocurrency to send money and avoid stiff fees and the high CBN exchange rate that reduces the value of the exchange by up to 20-30%.

The crypto exchange platform, Yellow Card, reported growth of 1,840% in remittances processed on its platform in 2020, with Nigeria making up more than 50% of its users. This increase in cryptocurrency usage tracks with the overall growth of Nigeria’s Fintech sector.

Nigeria’s digital transformation

In Nigeria, the government has made concerted efforts toward streamlining and developing policy frameworks and national strategies to advance its digital transformation. President Buhari redesignated the Ministry of Communications as the Ministry of Communications and Digital Economy (FMoCDE) in 2019 and moved the National Identity Management Commission to this ministry.

Last year, FMoCDE released the eight pillar Digital Economy Policy and Strategy 2020-2030 and subsequently launched a Digital Nigeria skills development platform. In support of the digital strategy, the NITDA released the draft National Adoption Blockchain Strategy, and in September 2020, the SEC released its position confirming cryptocurrency as a security. As recently as January 2021, the CBN announced its regulatory fintech sandbox framework.

Crypto ban

In light of Nigeria’s efforts to advance its digital economy agenda, the crypto decision seems counterproductive and reactive. While the crypto ban has led to an initial chill, with banks closing accounts and some owners withdrawing their funds, it is unlikely to impact crypto’s growth.

Instead, users may move to P2P trading platforms that facilitate trading without an intermediary and allow non-fiat payment methods. Already, there has been an almost 16% jump in Bitcoin usage for P2P lending since the announcement, and Binance, the world’s largest crypto exchange platform, recently introduced a new P2P option for Nigerians. Many Nigerians have attributed the decision to the CBN’s urgent need to inject and retain forex in the economy by any means. But if the goal was to increase forex or promote transparency, pushing users to P2P platforms undermines these aims.

Trust in government institutions has also taken a hit. Some view this as bureaucratic stifling of innovation or a desire to increase control and cut off a means of livelihood for many young Nigerians facing a projected unemployment rate of over 30% in 2021. The frustration expressed by Nigerians taps into a broader dissatisfaction with a government perceived as corrupt and non-responsive. The lack of public or industry consultation or policy coordination has reinforced this viewpoint, and Nigerians on Twitter launched a #WeWantOurCryptoBack campaign.

Others noted that political influence could be driving the decision after some #EndSARS protestors turned to cryptocurrency to raise funds when the government froze their bank accounts. CBN explained the decision by the need to protect consumers and counter the use of cryptocurrencies for criminal activities while emphasizing that the decision does not detract from the bank’s commitment to developing the fintech sector.

Enhanced policy coordination and consultation with the industry and users will be critical for the government to build trust, instill investor confidence, gain public buy-in, and push forward digital transformation.

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Bitcoin

Bitcoin Holds Above $67,000 Amid Trump Win Bets

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Bitcoin is holding above $67,000 after yesterday’s correction after breaching the $69,000 level and rising to its highest level since late July.

Yesterday’s correction comes after an upward trend that investors are pushing to continue in light of a set of supporting factors, whether from the massive inflows into cryptoinvestment products or from more bets on Donald Trump winning the White House again.

Cryptocurrency investment products recorded massive inflows last week, reaching $2.2 billion, which represents the highest level since last July, with Bitcoin accounting for most of these flows that went to US spot ETFs, according to CoinShares. Net flows to these funds amounted to more than $294 million yesterday alone, according to SoSo Value.

This comes with two weeks left until the US presidential election. While the Polymarket betting market indicates that Republican candidate Trump is likely to win with a 63% probability, the betting site has sparked controversy over who is behind the significant increase in Trump bets. In contrast to Polymarket’s results, the poll average indicates that Democratic candidate Kamala Harris is ahead by 48.2% compared to 46.4% for Trump, according to FiveThirtyEight.

While this disparity and fluctuation in polls and predictions is likely to keep cryptocurrencies vulnerable to sharp volatility in the coming days, as the identity of the winner of the White House presidency might shape the future of the industry.

However, the futures market is presenting a mixed story and is questioning the sustainability of Bitcoin’s bullish trend. Bitcoin futures open interest regained its record level of more than $40 billion yesterday, according to CoinGlass, despite the price correction. This correction only resulted in a very small liquidation of the long positions of about $28 million yesterday.

Of that $40 billion, $12.5 billion was on the Chicago Mercantile Exchange (CME), which also represents a new record high for Bitcoin futures on the US’s largest futures exchange. This reflects the increasing involvement of institutional investors in driving price action.

What is concerning is the decline in the long/short ratio from 1.04 on Sunday to 0.94 today, which may reflect increasing bearish bets in futures market, which in turn may indicate a possible reversal of the bullish trend and a renewal of yesterday’s losses soon.

Written by Samer Hasn, Senior Market Analyst at XS

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Binance Expands Crypto Access in West and Central Africa With Mobile Money Integration

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Binance, the world’s leading blockchain and cryptocurrency infrastructure provider continues to drive innovation and expand access to cryptocurrency in Africa, now allowing users in Benin, Cameroon, Ivory Coast, Democratic Republic of Congo (DRC), Togo and Senegal to purchase crypto directly through mobile money payments enabled through local partnerships. 

This new functionality further strengthens Binance’s commitment to providing simple and secure access to cryptocurrency for users across the continent, reinforcing the platform’s vision of financial inclusion.

Samantha Fuller, Spokeswoman for Binance says “We remain focused on advancing financial inclusion and delivering user-friendly solutions for crypto adoption across Africa. This expansion into West and Central Africa is a significant step in our mission to increase crypto adoption, providing millions of people with more direct access to the global digital economy”.

This new service currently supports only BUY transactions, further simplifying the entry point for new crypto users in these regions, while providing them with a reliable and secure platform to acquire digital assets.

How to buy crypto:

  1. Log in to your Binance app and select [Add Funds] from the homepage.
  2. Choose your local fiat currency you wish to use by selecting the currency in the top-right column.
  3. Follow the instructions to complete your crypto purchase.

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Bitcoin

Bitcoin Fails to Hold $63,000 Amid Weak Risk Appetite, Growing Selling Pressure

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bitcoin to Nigerian Naira - Investors King

Bitcoin remains below $63,000 after failing to hold above it over the past two days while Ethereum is also struggling to reclaim $2,440.

The crypto market has been trading sideways since the beginning of this week.

The cautious moves in the crypto market come amid uncertainty over a range of economic and political factors in the US and geopolitics in the Middle East.

Add to that the potential selling pressure that the US government may exert with its permission to sell around 70,000 Bitcoin.

The Supreme Court has allowed the US Marshals Service to proceed with the sale of 69,370 Bitcoins seized from the Silk Road online store, which would be the largest sale of its kind in history. While the nature and pace of this selling is not yet known, it will not necessarily put downward pressure on prices if it is done in over-the-counter (OTC)
transactions, according to Beincrypto.

As for the economic side, in light of the surprise labor market numbers that were much better than expected and Jerome Powell’s hawkish speech, hopes for a rapid continuation of interest rate cuts this year have diminished. While the relatively high rates remain for a longer period and the continued rise in Treasury bond yields will weaken appetite for risky assets in general, including cryptocurrencies.

Whereas, after the hypothesis of a half-percentage point cut at the next November meeting was the most likely, it has now become excluded in the Fed Fund futures market, and the probability of a quarter-percentage point cut has become 87%, according to the CME FedWatch Tool. The remaining 13% is for the possibility of keeping current rates unchanged.

The state of caution may also prevail in the markets in the coming weeks, as we anticipate the presidential elections in the United States, which will begin next month. While the outcome of these elections could cause a structural shift in the crypto industry.

Far away, in the Middle East, markets are still anticipating the nature of the expected escalation in the region, especially regarding the nature of the Israeli response to the unprecedented attack from Iran and the nature of the counter-response. While one of the most prominent scenarios is targeting energy facilities, which would bring inflation back to the forefront, which in turn may require central banks to keep interest rates high.

 

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