Nigeria’s Central Bank on the 5th of February, 2021, released a press statement directing all financial institutions not to involve in bitcoin and other cryptocurrency transactions. Another press statement was released two days later by Nigeria’s Apex bank explaining why it took the decision of restricting banks and other financial institutions from involving in cryptocurrency-related transactions. This doesn’t spell the end of crypto in the country as there are other ways to buy bitcoin and engage in crypto transactions in the country.
It was stated in the circular that banks had been banned from dealing in cryptocurrencies since January 2017, emphasizing that the call was made to protect the nation, the banks and citizens of the country, most especially the young people.
It is essential to know that the move by the Central Bank of Nigeria is not a strange one as many countries, foreign financial institutions, central banks and notable investors have also advised against the use of cryptocurrencies. They have all shown similar concerns to the risks associated with cryptocurrencies – illegal money transfers, investment loss, and funding of terrorism.
Countries such as Canada, Iran, Ecuador, Morocco, Saudi Arabia, Egypt, and even China have issued specific levels of prohibitions on banks and other financial institutions on conducting digital assets transactions. The press statement was signed by Mr. Nwanisobi Osita who is the Ag. Director, Corporate Communications of the Central Bank of Nigeria.
Read how to use USDT to make international transfers.
Consequences For Nigerian Financial Institutions
Financial institutions in Nigeria are at the center of Nigeria’s monetary space. Thus, reviewing the effect of the prohibition by CBN can reveal how other financial institutions will be affected by the policy.
One of the positives of the prohibition by CBN is that it provides a level playing ground. The crypto ban by Nigeria’s apex bank has reinforced the Naira and made sure that the banking system in Nigeria keeps being relevant.
Another positive of the ban is that it will assist in protecting the country’s diaspora payment that has been estimated at $24 Billion and has been a major focus of the Central Bank.
Digital assets have been extensively embraced to bypass these policies which result in the reduction of earnings for financial institutions. The digital asset prohibition will help to divert payments via the right channels.
Nigeria’s financial-tech start-up ecosystem has been upbeat in recent years and has kept being a channel for the inflow of foreign investments. The fintech ecosystem in Nigeria realized over $600 million within five years (2014 to 2019) and $55 million in the first quarter of 2020 of which most of it was foreign investments.
The Central Bank’s latest decision on digital assets whilst hoping to shield the institutions within its scope (which includes financial-tech firms), could make Nigeria’s financial-tech companies suffer the forfeiture of investments as more fintech adopts digital assets.
The Central Bank’s decision isn’t a law per se. It doesn’t declare the buying or trading of digital assets illegal. People can still buy bitcoin and other cryptocurrencies. The directive just prohibits financial institutions from processing digital assets related transactions.
However, the trading of digital assets has evolved over time. Traders can buy and sell bitcoin through P2P and spot cryptocurrency exchange or through bitcoin atm. The P2P exchanges use an escrow system to process trades between buyers and sellers without involving the banks.
Likewise, the order to foreclose bank accounts of persons with digital assets history doesn’t include blacklisting of their bank verification numbers. However, some financial institutions may find this self-sabotaging and may not close the accounts.
The CBN hasn’t banned Nigerians from buying nor has it placed a direct prohibition on digital assets. The CBN can not ban cryptocurrency, rather it only made sure that institutions within its scope do not engage in cryptocurrency transactions.
How To Deal With The Situation
You can overcome this CBN hurdle via peer-to-peer transactions. Since owning or buying Bitcoin and other cryptocurrencies is not illegal, Nigerians can still purchase BTC and other cryptocurrencies and trade as long as banks do not have the knowledge of what they are making payments for.
The P2P trade system has been in existence for a long time and contributes a significant share of the daily trade volume of bitcoin and major digital assets. With the peer-2-peer system, individuals can still buy bitcoin and other cryptocurrencies and also sell between each other.
Trading firms such as Luno, Binance have been affected by the CBN directive which has resulted in these firms stopping naira deposits.
One of the ways to buy Bitcoin securely now without the fear of being defrauded or your bank account being closed is via Remitano P2P cryptocurrency trading firm. The platform serves as an escrow between buyers and sellers, making sure the transaction process is secure and seamless.
The Remitano platform is presently the foremost P2P medium in Nigeria, South Africa and other countries. The trading firm has constantly developed over the years to give the ideal platform for both buyers of digital assets and sellers, which means there’s an increased level of trust within the cryptocurrency ecosystem.
Additionally, Remitano provides a very easy and simple user interface. The trading firm also provides prompt and cordial customer service accessible every day to offer help to those buying or selling digital assets.
For those who wish to buy BTC and other digital assets on Remitano, there are a couple of steps to take. Find a buyer you want to buy from, after selecting a buyer, transfer the amount in naira to the bank account number of the person selling without informing your bank what the payment is for. As soon as you confirm the receipt of remittance, Remitano then makes the cryptocurrency available in your wallet.