The restriction on banks and other financial institutions by the Central Bank of Nigeria (CBN) to facilitate transactions of cryptocurrencies has pushed more players into the peer-to-peer market.
Following the restrictions, banks and other financial institutions began to close down accounts of persons and entities involved in cryptocurrency transactions. While players have resorted to peer-to-peer (P2P) kinds of transactions, the influx has blossomed the market in terms of volumes of transactions.
Nigeria recorded an all-time trading volume of $1.5 billion on Paxful in 2021. Paxful is one of the biggest crypto P2P trading platforms globally.
According to UsefulTulips, Nigeria transacted $99.1 million worth of Bitcoins in the first quarter of 2021
Peer-to-peer (P2P) refers to the direct exchange of some asset, such as a digital currency, between individual parties without the involvement of a central authority.
“The approach by the CBN is problematic, and we have seen a rapid increase in transactions carried out in the P2P market after the restriction, Senator Ihenyen, President, Stakeholders in Blockchain Association in Nigeria (SIBAN) told TechEconomy in an interview.
“What the CBN should be doing as the supervisor of the banks is to ensure that there is protection, managing the risks associated with cryptocurrency trading, and collaborating with the players.”
Ihenyen who was also one of the panelists at the recent BusinessDay Conference, on the “future of payment,” revealed that it is still very legitimate to carry out cryptocurrency transactions in Nigeria as long as they are not being facilitated by the banks.
On February 7, 2021, the CBN in a press release claimed that cryptocurrencies pose risks of loss of investments and financing terrorism, and fraud, among other disadvantages.
He agrees that there are a lot of risks that digital currencies portend for the financial system. But the apex bank has to analyze cryptocurrencies from a point of view of strengths and opportunities.
He explained that the issues raised by the CBN, such as terrorism and money laundering can be checked when there are regulations that will ensure that players in that space, such as Quidax, Bundle, Binance, and the rest have a KYC (Know Your Customer) compliance process.
Further, aside from regulating its activities, the CBN also needs to consider engaging players, stakeholders, and operators in the sector to address the issues and concerns of the CBN.
“Pushing the players away is not really the right answer to the issues associated with cryptocurrency. They have to be engaged in a roundtable to address the concerns collectively,” he said.
“The same technology powering cryptocurrencies that the CBN prohibited is the same technology the eNaira was built on;” Motunrayo I. Joseph-Hunvenu, Lecture, Faculty of Law, Lagos State University.
She explained that the CBN would have leveraged the success of cryptocurrency to be successful in eNaira, adding that a more collaborative approach would have aided its adoption.
“CBN wants Nigerians to adopt the eNaira but they restricted cryptocurrency transactions. The truth is Many Nigerians are quite reluctant to adopt eNaira.”
eNaira is a Central Bank of Nigeria-issued digital currency that provides a unique form of money denominated in Naira. eNaira serves as both a medium of exchange and a store of value, offering better payment prospects in retail transactions when compared to cash payments.
She said digital payment is the future and trying to monopolize it will not bring anything good.
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