As a stronghold of cryptographic space in Africa, Nigeria has decided to curb the momentum of the adoption of cryptomoney on its territory. The decision taken by the country’s central bank (CBN) is having difficulty getting across to local players because of the arguments put forward by the banking authority. The latter claims to protect the country from the dangers linked to cryptographic transactions where the population finds a way to fight against the economic inflation that is shaking the country.
Cybercrime and money laundering put forward as an argument by the CBN
The CBN did not have to look very far to find its arguments evoking the usual criticisms, namely the volatility of cryptomoney, a channel offered for money laundering or the financing of terrorism. « The recent regulatory directive has become necessary to protect the financial system and the Nigerian population in general from the risks inherent in transactions of cryptographic assets, » said the Central Bank. It went even further in its reasoning, citing complaints from the United States.
The FBI reportedly alerted the Nigerian government to the existence of cybercriminal activities originating in the country and linked to cryptography. The CBN did not need so much for it to make a strong case that: « many reputable banks and investors have been excluded from cryptography because of the adverse effects of its widespread use for illegal activities. Although cryptomoney is linked to cybercrime, the resulting volume of cryptomoney, as a proportion of all cryptographic transactions, remains very low.
Exaggerated accusations and huge consequences for the Nigerian people
As Chainalysis revealed, there has been a significant decline in these activities, with legal cryptographic transactions even tripling between 2019 and 2020. A precision that has been carefully omitted by the CBN, as Danny Oyekan, founder of a local Blockchain company, stated. « For a long time, cryptography has been associated with evil activities, but in reality, fiat is being used ten times more for criminal purposes. Prohibiting access to cryptography will have more negative consequences for a country than the criminal activity with which the industry is falsely associated ».
The consequences Mr. Oyekan refers to include the rise in unemployment, which has tripled in the country over the last five years. With the closure of access to the foreign exchange market, millions of Nigerians have opted to use cryptomoney to safeguard their assets in a context of inflation. This strong demand has also led to a rapid development of the cryptographic industry in the country as David Ajala, CEO of NairaEx, said: « There are at least 100 start-ups in Nigeria operating in this industry as stock exchanges, educators, digital asset management companies, etc. ». They have all employed thousands of Nigerians, » he said.
With its back to the wall, the Nigerian cryptosphere is calling on the government to put in place regulations to further curtail the illicit activities referred to by the CBN. It is proposing that the CBN should introduce a licensing regime for companies in the industry while also considering holding bitcoin on its balance sheet.
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