What is the solution to crypto trading ban in Nigeria? This was the trending question all over the internet by crypto enthusiastic in Nigeria after the Central Bank of Nigeria disseminated a piece of information from its Twitter page on the 5th of February 2021 warning all financial institutions to stop partaking in the exchange and purchasing of crypto coins. This significant ban on crypto was disseminated in the circular stamped with the CBN emblem in addition to signatures from two highest CBN leaders.
In the circular, instructions to classify and close the accounts of organizations and people who use their accounts to trade cryptography were sent to Nigerian controlled financial institutions. The circular seeks to bring legal action against financial institutions who are not in accordance with the order. See what is written in the circular from the image below –
Since the ban came suddenly, many people who are into crypto trading and the financial institutions are shocked. According to verified sources within the institution, there was no announcement beforehand even though many have been expecting such a regulation in the future and not so sudden.
The sudden ban of crypto is one that does not follow regulatory practices – such practices where investors in the industry will be contacted before banning their service. A sudden ban like this happened to Chaka WealthTech corporation in December 2020. All what the company saw was the news publicizing the ban; they were never informed beforehand!
Why Nigerian Government Banned Crypto Trading Platforms In Nigeria?
One of the main pros of BTC and other crypto coins is that they can’t be controlled by the government or any individual regulation. Since this will always be true, the ban of crypto is to restrict the way people transact the coins through the financial institutions in Nigeria.
However, this is to prevent institutions dealing with money deposits in banks (DMBs), the institutions dealing with deposits without banks and related monetary bodies in the country from making transactions on crypto and also stop dealing with crypto coins in general.
In addition to this, the circular orders all financial institutions to detect and close all the accounts of people or groups who are transacting in crypto under them. Many online payment platforms such as Paystack partnered with these monetary organizations to make transactions easy for Nigerians. Their partnership with these financial institutions makes it easy for them to process debit card and direct bank deposit transactions. However, this is no more possible according to what is released in the circular. This simply means that the CBN is trying to stop fueling the crypto platforms.
An example of this ban is that of gold. Since the CBN cannot produce gold, they stop all financial institutions from dealing with gold and prevent their customers from buying gold. As for crypto, people cannot own it if they find it difficult to buy and sell.
Although we need to identify the reason behind the ban in order to find a solution to it, CBN doesn’t have any reason shown to the public that leads to the ban. All they wrote that provides a hint about the ban is that all financial institutions are warned and prohibited from dealing in crypto exchange and helping in the processing of crypto exchange fund payments.
This statement refers to a circular that was once released in January 2017. In the document, CBN had cancelled all regulated monetary institutions from dealing with digital currencies in any form. Here is 2017 circular –
Why It is Necessary to Control Crypto Trading In Nigeria?
Bitcoin and other crypto coins claim to be a decentralized P2P payment system that is not controlled by any central agency but by the power of its users. The main reason why the government is scared of this currency is that it lacks central authority. The government can easily control the fiat currencies and they use monetary strategy to issue or destroy money anyhow.
They also issue orders on how the currency is moved, trace illegal activities, gather taxes from the people and dictate who profits from the currency. All these are lost once a non-government organization creates another currency.
How the Current Crypto Ban Will Affect Traders In Nigeria
With the intense tension in Nigeria now, Nigerians are still waiting to see how the implementation will go in the country. If this finally happens, it will be very hard for Nigerians to get their funds in their Nigerian bank accounts from their respective crypto platform accounts.
While this does not mean that those trading crypto are criminals, it thus makes it harder for everyday traders to own and trade crypto coins. This is not the right step in a digital world where many countries are looking for different ways to enforce cryptocurrencies on their citizens. This simply means that the CBN has drawn the country back several years ago!
Ever since the restrictions on crypto platform transactions, Nigerians have been wondering whether the CBN understands the effects of crypto on traders. This ban now shows that the local crypto industry will be facing serious inspection moving forward. With their success in the year 2020, it is expected that local crypto trading groups will soar higher this year. But with this new circular on the crypto ban, they will put their plans on hold and look for ways to battle the new restriction.
The Available Solution for Crypto Traders in Nigeria
No matter the power of any top financial organization in any country, it is not possible to ban the existence of crypto coins. Since this is not possible, it isn’t in the circular. This is just like their inability to place a ban on the dollar, pounds and euro. Conversely, the action CBN took is to make sure that their regulated financial organizations no longer partake or process cryptocurrency trades for their customers.
For now, the only solution for crypto trading to continue in Nigeria is to start using the Peer-to-Peer (P2P) transaction system. Since there is no ban on owning crypto in Nigeria, this means Nigerians can still acquire crypto and trade it among each other without any issue. This will only be possible if the financial institution they are using for payment doesn’t know the reason behind the payment.
This type of transaction system has always been in existence and it’s a more used system than the centralized, fiscal institution or other crypto exchange platforms. One feature of crypto ownership is its decentralized nature. This means that people can always transact it among each other without involving any exchange platform.
The Use of Paxful and LocalBitcoin For Crypto Trading In Nigeria
Since it is only through the centralized exchanges that it is possible for CBN to regulate crypto well and they didn’t cut that off yet, Nigerian traders can still use that for now. Alternatively, the sudden reappearance of this type of trading system will lead to increase in crime rate and fraud among crypto traders in Nigeria.
To prevent this from happening, crypto traders can turn to the use of the Paxful platform or by turning to local crypto companies for their crypto exchange. These companies will have to design different P2P platforms where crypto traders will register, get verified and start selling to other traders on the platform.
An example of this platform is Paxful and Nigerian traders can move there to exchange their BTC and other coins into Naira equivalent into their bank accounts.
A simple scenario of the P2P transaction system is where the Trader A sends their crypto coin to the escrow while the Trader B sends the naira corresponding of the crypto amount into the bank account of Trader A. After confirmation from Trader A, the escrow sends the crypto to the Trader B. Apart from Paxful, Remitano is another leading P2P platform. In Nigeria, Paxful and Buycoins are recommended for some smooth P2P transactions.
The current crypto ban does not mean it’s the end for crypto traders and startups. Many traders have awaited and prearranged for this to happen one day. Although they have planned many options after this happens, none of these options is easy for them to explore.
As a creator in Nigeria, nothing is easy to create and maintain in the country. Early communications between these crypto exchangers and their customers have sued for calmness. They have notified their customers that they are communicating with crypto regulators to resolve the issue on ground.
On the same day of the release, Quidax and BuyCoins notified their customers about their activities to ensure the smooth running of their respective platforms despite the current CBN embargo on crypto. Since this ban affects wallet funding, all the affected platforms are already looking for different ways to see the smooth running of their platforms while improvising their deposit methods.
You can always go about your crypto trading effectively as before; the only thing that changes is that you will no longer have to withdraw to your bank account directly. Now, you will be using the P2P exchange system for the exchange. You can use Paxful and other local crypto exchangers for your crypto trading.