Following the Central Bank of Nigeria directive to banks and other financial institutions on Friday ordering the closure of all accounts operating cryptocurrency exchanges, some experts in cryptocurrency trading have raised the alarm over its economic impact.
The Blockchain Solutions Architect, Sterling Bank, Mr Charles OkaforMbah, in an interview with Sunday PUNCH, noted that crypto trading is divided into formal and informal exchanges.
“There are the formal exchanges, like Binance, which is the most popular; and Patricia. We have some other players, like BuyCoins and Bundle Africa. If we put (together) the figures from these traders, we could be seeing a huge amount on a weekly basis.
“There are informal markets too. We call them over-the-counter traders. This is where the peer-to-peer traders are and most of these people make use of private chatrooms such as WhatsApp, and Telegram or any other favourable platform. The volumes there are not calculated yet, so if you add those volumes that people are doing in trading rooms, then the figures tend to go up as well.
“With such a policy, it is killing a lot of businesses by pushing them out. If the government is trying to stop people from trading crypto by blocking the accounts of these exchanges that people are paying money to and then withdrawing their money from those accounts, it is cutting off a lot of players from participating in the crypto space.”
OkaforMbah, while speaking on job creation occasioned by crypto trading, said, “My mum is going on 65 years old and she trades in crypto, so it is not just the youth that would be affected. It is also affecting the older generation.”
He noted that crypto exchanges employed blockchain developers – some of the highest paid programmers saying – “As of 2020, blockchain developers are highly sought after around the world.”
Blockchain is a type of diary or spreadsheet containing information about transactions, while blockchain developers enable secure digital transactions by creating systems to record and store blockchain data in a way that prevents changes or hacks.
OkaforMbah explained that local exchanges also employed smart contract staff, marketers and customer service staff, and rented office spaces. He added that, though the CBN policy created a ripple effect, he was optimistic that trading would bounce back.
The crypto expert said, “Most users are now getting emails from exchanges that withdrawals and deposits are no longer happening. But definitely, there will be a way out but it will take some time for people to adapt and that is where the P2P trading comes in. That is how crypto trading started.
“China and India tried something like this but it didn’t work. Visa is working on something with Anchorage to enable banks to be able to trade and buy bitcoins for their customers. If developed countries are struggling with blockchain and crypto legislation, why should the government in Nigeria be frustrating the effort of citizens who are trying to make a living for themselves?”
Similarly, the Founder and Managing Director, Cowry Asset Management Limited, Mr Johnson Chukwu, told Sunday PUNCH that the CBN policy would have an impact on the cryptocurrency trade in the country and render some citizens unemployed.
“I have seen a couple of young Nigerians who have made reasonable income from cryptocurrency trading. Remember, Nigeria is largely a youth-populated country, and we have many educated people who may not be fully employed.
“Because of that, many of them are into cryptocurrency trading and they understand it. In effect, we may be cutting off their source of income and fiscal engagement. There will be some impact on the income of cryptocurrency investors,” he said.
Chukwu said despite the concerns about cryptos by the apex bank of the possibility that they could be used to fund illegal transactions like terrorism, closing the accounts of investors needed not to be.
“There could have been only warnings so as not to exclude investors from the financial system completely. The CBN should find a way to harness the positive side of the new knowledge to advance society,” he said.
Chukwu said now was the time for the financial regulators to evolve methods of either regulating cryptocurrencies or integrating them into the financial system, saying the technology would not go away.
“Once there is an advancement in knowledge, you cannot reverse it. My position is that the regulator will ultimately need to find ways of regulating the operations of cryptocurrencies because as long as the knowledge has evolved, it won’t go away. Stiff regulation can only push it to the parallel or black market,” he said.
Meanwhile, the Chief Executive Officer of Economic Associates, Mr Ayo Teriba, said the CBN could not ban cryptocurrency trading, just in the same way the CBN could not bar people from gambling.
“But the CBN can restrict banks and financial institutions licensed by it from getting involved in activities like gambling.
“So, the CBN is not saying people can’t trade cryptocurrencies; it is only restricting the financial institutions because it has the responsibility to manage systemic risk in the country. As a country’s risk manager, it will be risk-averse [to cryptocurrency trading],” he said.
Atiku, Ezekwesili tackle CBN
Meanwhile, a cross section of prominent Nigerians took to social media to express their disapproval of the apex bank’s policy.
Former Vice-President Atiku Abubakar, in a statement on Twitter titled ‘We Need to Open up Our Economy, Not Close It,’ on Saturday, criticised the CBN policy.
It read in part, “What Nigeria needs now, perhaps more than ever, are jobs and an opening up of our economy, especially after yesterday’s report by the National Bureau of Statistics indicated that foreign capital inflow into Nigeria is at a four year low, having plummeted from $23.9bn in 2019 to just $9.68bn in 2020.
“Already, the nation suffered severe economic losses from the border closure and the effects of the COVID-19 pandemic. This is definitely the wrong time to introduce policies that will restrict the inflow of capital into Nigeria, and I urge that the policy to prohibit the dealing and transaction of cryptocurrencies be revisited.”
In the same vein, former Minister of Education, Dr Oby Ezekwesili, tweeted, “Frankly @cenbank, all you needed to do was, map all the legitimate risks associated with #cryptocurrency and gather a subset of the super brilliant Nigerian young minds in #FinTech so you listen and learn more. Learning is the greatest asset of the policy-maker. Never late.”
Crypto ban won’t deter us, Nigerian traders insist
Despite the policy, some Nigerians on Twitter remained defiant, saying they were not deterred by the CBN policy.
Responding to the ban, Abdulhameed Abu said, “The simple truth is that there is nothing @cenbank can do to enforce this ban. The very definition of a decentralised system is the absence of concentrated control. If I were you, I would be proactively looking for ways to regulate and tax such a potentially huge source of revenue.
“Countries like America and the others have realised this earlier on. They have since come up with interesting ways to regulate and generate revenue from the cryptocurrency sector. Meet with key players in the sector and come up with good laws regulating it and forget about the ban.”
Emmy Jesus said, “It’s simple: trade with Ghanaian or Togolese banks, open an international account and forget about Nigerian banks with the CBN policy.”
@CDiepreye said, “Nothing done by the @NigeriaGov can stop me from trading on @binance and others. After all, I make money abroad and I bring it home (Nigeria economy).”
@sirpeeworld, said, “No one should panic yet. Many ways will be discovered soon. If you have anyone outside Nigeria, it will be easy for you to do your bitcoin things. You can transfer to anyone outside Nigeria. They will buy from you and send you naira.”