The business world is experiencing a rise in cryptocurrency transactions as well as a fall in the global use of cash. There have been huge debates over the digital asset as it continues to gain ground globally since its inception in 2008.
Due to the absence of regulatory policies by any central bank, investors would rather choose bitcoin as a better option. Kingsley Moghalu, former Deputy Governor of the Central Bank of Nigeria (CBN) disclosed that within the last five years, $500 million worth of Bitcoin has been traded in Nigeria.
Nigeria is said to be one of the top ten countries in the use of cryptocurrency in the world. The high level of trade was resulting from the ability of cryptocurrencies to protect them from the fluctuations in the value of the naira.
Bitcoin, on Monday, February 8, almost reached a high $45,000. This was following Elon Musk’s electric car maker Tesla investment of $1.5 billion in the digital currency.
Fawad Razaqzada, an analyst at ThinkMarkets described it as the ‘biggest development for the cryptocurrency industry’.
The analyst added that Tesla will become a major player in the auto industry ‘if it starts accepting bitcoin as a form of payment, it will give the digital currency further legitimacy.’
Bitcoin has witnessed a speedy rise since March after PayPal, an online payment platform approved account holders to use cryptocurrency. Since the start of the year, digital currency is at a high 50 percent. This has also created a pathway for criminals through money laundering.
The Central Bank of Nigeria on Sunday disapproved of the use of Cryptocurrencies stating that it increases illegal activities and risks, among others. The bank had earlier issued a directive ordering Deposit Money Banks to reject transactions with cryptocurrencies. According to the CBN, the directive was given to protect the financial system and Nigerians from the many risks associated with crypto asset transactions such as terrorism and money laundering which has increased lately.
‘Due to the fact that cryptocurrencies are largely speculative, anonymous and untraceable, they are increasingly being used for money laundering, terrorism financing, and other criminal activities.’ CBN stated.
‘Small retail and unsophisticated investors also face a high probability of loss due to the high volatility of the investments in recent times’, it added.
CBN defined cryptography as a ‘method of encrypting and hiding codes that prevent oversight, accountability, and regulation.’ The bank also stated that this was the reason why some countries like China, Canada, Taiwan, Indonesia, Algeria, Egypt, Morocco, Bolivia, Kyrgyzstan, Ecuador, Saudi Arabia, Jordan, Iran, Bangladesh, Nepal, and Cambodia had issued some restrictions on financial institutions dealing with cryptocurrency transactions.
The obvious disapproval of cryptos by the bank as they have been tagged as unregulated and unlicensed entities has elicited various reactions.
Crypto experts have opined that shutting out cryptocurrencies from the country’s financial system will be a huge loss to the Fintech space. Nigeria and other nations that have been ranked as the worst countries to start a career have refused to totally accept or legally accommodate cryptocurrency and other digital assets.
Kingsley Moghalu stated that with almost all global activities becoming digital, banning it would not be a recommended solution. All investments come with risk hence the need to balance the risk.
Chainalysis data also revealed that illicit crypto activity in Africa is at a low percentage when compared to other regions around the world as it was about 2%.
Mr. Johnson Chukwu, the Founder and Managing Director, Cowry Asset Management Limited stated that many young Nigerians make use of crypto as a source of income. He stated that a large number of youths in the country who are educated but not fully employed have resorted to cryptocurrency trading. The new directive will cut off their source of income and fiscal engagement.
Adebayo Juwon, African Lead at FTX crypto exchange also stated that Nigerian monetary stakeholders shouldn’t view Crypto as a threat to the current financial system, instead, they should embrace the evolving financial market.
‘Blockchain Council reported that Australia, China, Dubai among other developed nations is making precise moves towards the adoption of blockchain and accepting crypto payment. According to Forbes, payments giant PayPal will allow its 346 million users to buy and spend bitcoin and a handful of other major cryptocurrencies,’ Juwon added.
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The currency continues to gain ground in the financial space. Rather than restricting cryptos, policies should be created that could help regulate the digital currency as the technology would not leave.
‘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,’ Johnson Chukwu stated.
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Although digital currency has been abused, one can hardly deny its huge impact on the economy. The currency can also be considered a better option for international payments, bypassing the dollar. The dollar is majorly an advantage to the US since it’s the world’s principal currency for transactions between countries.
A payment system that allows another alternative currency would be of immense benefit.