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Crypto vs Central Bank of Nigeria

By Vladan Lausevic | CryptoVlad | 20 Jan 2023

In Nigeria, the Central Bank of Nigeria (CBN), has taken a cautious and negative approach to cryptocurrencies. In January 2017, the CBN issued a statement warning banks and other financial institutions against dealing in cryptocurrencies, citing the potential risks to consumers and the financial system. The bank also warned that transactions in cryptocurrencies are not backed by any tangible assets, and therefore are not legal tenders.

Despite this warning, the use of cryptocurrencies has continued to grow in Nigeria, driven partly by the country's high inflation rates and a lack of trust in the traditional banking system. According to a survey conducted by Chainalysis, a blockchain analysis firm, Nigeria ranked as the third-largest market for Bitcoin in Africa, behind South Africa and Kenya.

However, the CBN has taken steps to further regulate the use of cryptocurrencies in Nigeria. In February 2021, the bank announced that it would be working with the Nigerian Securities and Exchange Commission (SEC) to develop regulations for using cryptocurrencies in the country. These regulations aim to protect consumers from fraud and other risks associated with cryptocurrencies while also providing a framework for legitimate businesses to operate in the space.

Despite the CBN's warning and regulatory efforts, many Nigerians remain positive on the future of cryptocurrencies. Some believe that cryptocurrencies' decentralized and secure nature could provide a valuable alternative to the traditional banking system, particularly in a country like Nigeria where trust in banks is low. Additionally, the government of Nigeria is also exploring the use of blockchain technology and cryptocurrencies for various initiatives such as digital identity, voting, and supply chain management. These projects are being considered to help with transparency and security issues in these sectors.

In conclusion, while the CBN has taken a cautious approach to the rise of cryptocurrencies, it is important to note that the use of cryptocurrencies is growing in Nigeria, driven in part by high inflation rates and a lack of trust in the traditional banking system. However, with the CBN and the SEC working to develop regulations for the use of cryptocurrencies in the country, it will be interesting to see how the Nigerian government and its citizens adapt to this new technology in the future.

One interesting development is the emergence of cryptocurrency exchanges in Nigeria. These exchanges, such as Quidax and Binance, allow users to buy, sell, and trade cryptocurrencies, providing a platform for individuals and businesses to participate in the cryptocurrency market. However, it's important to note that these exchanges are not officially recognized by the CBN and operate in a legal gray area.

Another development is Nigeria's growing interest in initial coin offerings (ICOs). An ICO is a fundraising mechanism where a company creates and sells digital tokens to investors in exchange for cryptocurrency. While ICOs have been controversial globally due to their association with fraud and scams, they have gained popularity in Nigeria as a way for startups and entrepreneurs to raise capital.

The Nigerian government has also been working on a Central Bank Digital Currency (CBDC) which would be a digital version of the naira, the country's official currency. The CBN has been working on "Project CBN" project since 2019, but it is yet to be launched. The use of CBDC is a step in embracing the technology behind cryptocurrencies and blockchain. In addition to these developments, there is also a growing community of cryptocurrency enthusiasts and experts in Nigeria. This community includes individuals and groups working to educate and raise awareness about the potential of cryptocurrencies and blockchain technology.

It's worth noting that the adoption of cryptocurrencies and blockchain technology in Nigeria is still in its early stages and there is still a lot of uncertainty about how these technologies will be regulated and adopted in the country. However, with the growing interest and developments in the space, it's clear that cryptocurrencies and blockchain technology will play an increasingly important role in Nigeria's economy and society in the coming years.

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Vladan Lausevic
Vladan Lausevic

Based in Stockholm, Sweden as a social entrepreneur. Working with decentralization of democracy, climate transformation and economy. For more info, please get in touch with me via [email protected]


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