The Central Bank of Nigeria’s (CBN) directive ordering the closure of all cryptocurrency accounts in Deposit Money Banks (DMBs), Non-Bank Financial Institutions (NBFIs) and Other Financial Institutions (OFIs) has affected companies like the one Ebuka (second name withheld) works in. Ebuka, the head of the customer service unit at this company, performs tasks including attending to customers who do online transactions like funding their cryptocurrency wallets.
His company works with online financial institutions like Monnify, a third party agent which helps to certify transactions automatically. But since the directive was issued, Monnify and other like applications and platforms have temporarily stopped rending such services leaving thousands stranded, 20,000 customers in the case of Ebuka’s company. Ebuka and his colleagues now enter such transactions manually. Ebuka says, “Monnify shutting down its platform has affected 20,000 customers in my company alone.
The workload has shifted to the staff where everything is now done manually. Usually, customers fund their wallets whether they are using debit cards or any other means through automation, supported by Monnify in our case. Now we do that manually increasing the workload of staff and causing delay in service delivery. It has impacted us hugely.”
Cryptocurrency is an encrypted digital medium of exchange that is hard to track or regulate by certified central banks around the world which can be mined individually while consuming 72,000 gigawatts of electricity. In the case of Bitcoin, the fact that this much-talked currency is untraceable and elusive from regulation is one of the reasons the CBN gave for its recent action, an action which many have criticised as abrupt and non-beneficial. Bitcoin, the first in this class of currency, was introduced in 2008 by an unknown person with the pseudonym, Satoshi Nakamoto. Nakamoto gave the elimination of third parties, that is traditional banks, as a paramount reason for the creation of Bitcoin.
This coin was soon followed by a host of other such currencies including Litecoin, Ethereum, Dogecoin and others. Binance is the leading global cryptocurrency exchange in the world and recognised the Nigerian Naira last March on its platform, the first African currency to reach that status.
After the directive came, Binance immediately suspended deposits in Naira making it hard for dealers of cryptocurrencies to continue working with them.
Unlike companies, individual traders of Bitcoin and other cryptocurrencies say that the ban will not affect peer to peer (P2P) trading while others who are dependent on companies before now will find ways to bypass the detection of the apex bank. Binance also introduced the P2P platform for naira last Friday.
Ebuka says, “People will find new ways to trade cryptocurrencies in the country. Like they say, necessity is the mother of invention. I have heard of the creation of new applications that will be used to trade without being caught by the government or any other body. That is more like you can trade on the app in stealth mode. It cannot be traced or anything. I believe plans are underway already.”
But some would not need this stealth mode to continue trading. Pelumi, a trader of Bitcoin, explains peer to peer trading. “Since they have removed the exchange companies, the only option we have now is to really trade peer to peer not peer to company, that is from one person to another. I am not scared of trading peer to peer because I am no longer interacting with those companies. Someone sends me bitcoin and I send them money. Those watching will only see that a transaction took place but won’t know what I purchased. They can’t stop peer to peer trading.”
Others like Emmanuel (not his real name), who have traded for five years on international platforms, are hardly affected. He tells New National Star that this ban would not affect his trading as he mostly conducts business with international platforms and usually in US dollars. He replies, “It doesn’t in any way affect my business, because there is no way they can track my transactions. If someone sends me bitcoin they can’t trace it and if I am making payment they don’t know what I am paying for. So, there is no way they can know that I am paying for a particular unit of bitcoin except it is in my narration of payment. So far there is no narration on it, there is no way they can track it.”
Emmanuel, however, agrees that some people use cryptocurrencies maliciously. “Some people have fallen victims to crypto conmen. I am aware that this is where the ban might help. Bitcoin can serve as a way to get illegal funds. By the time somebody wants to collect a particular amount abroad and doesn’t want the government to know about it, the person might say, okay let me go through bitcoin. Government and banks won’t know the nature of the transaction. Technology has not advanced to the extent of tracking down bitcoin transactions. I think that is the major reason for the ban,” he says.
But many doubt that technology would advance to a stage where Bitcoins and the likes can be tracked. Pelumi also believes these coins are here to stay. Others like Elon Musk, owner of Tesla and Jack Dorsey, owner of Twitter have openly endorsed Bitcoin. Tesla recently purchased $1.5 billion worth of Bitcoin.
Mr. Obinna Anyawu, the Chairman Financial Services Group of the Lagos Chamber of Commerce and Industry (LCCI), recognises this support for the coins.
He says, “The huge investment from Elon Musk of Tesla seems to reinforce the belief of the traders in the opportunities.” Anywawu states that the CBN ought to study these currencies instead of an outright ban.
“Hopefully, CBN will also move beyond their present action and understand the entire development by engaging the key global players and beginning to build capacity market ready as it seems the technology and ingenuity that drives the entire process can be harnessed or explored as other nations and their national banks are doing.”
The International Monetary Fund (IMF) in its Finance and Development journal of June 2018 shows open support for fiat-backed cryptocurrencies, explaining how they can reduce the reliance on government-issued money, “and unlike bank trancrypto-asseto asset transactions can be cleared and settled quickly without an intermediary.”
Anyanwu also says that the CBN directive will drive the search for alternative means given the ‘dogged nature’ of Nigerians. “CBN’s directive to banks will certainly affect the crypto trading as it will make it difficult for the traders to fund their accounts and access funds as well. However, they might find other ingenious ways to get around this setback given the kind of reactions we have seen from the traders and their dogged determination.”
A former deputy governor of the CBN, Kingsley Moghalu, in a recent interview with Channels Television was also of the opinion that the bank needed to find means to control cryptocurrencies instead of shutting Nigerians and the Naira out of such benefits the coins bring. One of such benefits is the ease of unemployment among the bubbling youths of the country.
Only last year, an estimate valued Nigeria’s trade of Bitcoins at approximately N216 billion ($566 million) placing the country next to the US and making it the second biggest market for the currency in the world. DMBs have been quick to effect the CBN’s ban though. Banks such as Guaranty Trust Bank, Access Bank and First Bank have started closing accounts of some customers who have traded in cryptocurrencies through their platforms in the past, Techcabal reports.