Monday, January 30, 2023
  • On February 5 2021, the Central Bank of Nigeria released a ruling that ordered all financial institutions to stop facilitating crypto transactions with any entity engaging in crypto
  • The Investment and Security Act 2007(Amendment) Bill has passed its second reading. The Security and Exchange Commission (SEC) will recognize cryptocurrency and other digital assets as capital for investment if it is passed into law.
  • As Nigeria joins one of the few African countries to embrace digital assets, Africa’s crypto ecosystem will steadily expand.

Africa’s crypto ecosystem has had an immense improvement in 2022. Africa still has its eyes set on dominating the 4th Industrial revolution. This is despite all the backlash and hits the crypto Industry has received in the past few months. The most noticeable achievement this year was noted by Chainanalysisi in a report stating that Africa has had a 1200% growth in its crypto adoption rate. African countries such as South Africa, Ghana, Kenya and Tanzania have dominated Africa’s crypto ecosystem.

South Africa recently took the next step and legally recognized crypto as a financial product. It is currently underway to create various crypto laws to regulate its use. Even though Africa has an immense crypto adoption rate, various African governments and Central Banks see it otherwise. Especially without a clear roadmap for fair and transparent crypto regulations. Fortunately, due to the strides made by peer African countries, Nigeria has a change of heart and may soon reverse its stance on crypto.

Nigeria’s rocky history with crypto

When cryptocurrency came to Africa, it was met with plenty of scepticism. African  Central banks and Governments could not see its value despite its embrace by individual crypto traders. Nigeria is no different from other African countries. Central Bank of Nigeria readily rejected adding a decentralized financial asset as a legal tender. Without definitive crypto regulations and laws, the Nigerian government isolated itself from any legal association for cryptocurrency.

Also, Read Crypto regulation framework in Africa: Why we need it and who benefits.

It is essential to remember that Nigeria was leading Africa’s crypto ecosystem in its crypto adoption rate during this decision. When questioned, CBN merely gave the standard arguments other Central Banks gave; crypto volatility and low fiat value.

Central Bank

The Central Bank of Nigeria announced its attempts to establish new crypto regulations to expand Africa’s crypto ecosystem further.[Photo/Decrypt]

On February 5 2021, the Central Bank of Nigeria released a ruling that shook its crypto ecosystem. The statement ordered all financial institutions to stop facilitating crypto transactions with any entity engaging in crypto. This effectively forced every other bank within Nigeria and all financial institutions to close all accounts of individuals engaging in such transactions. During the time, the Central Bank of Nigeria warned all who would do contrary to this directive would receive severe regulatory sanctions.

This statement caused adverse reactions for its citizens and crypto trades. Many needed clarification, which slightly affected their crypto adoption rate. Most crypto exchange platforms became sceptical about dealing with Nigeria. Fortunately, it did not last as CBN cleared the atmosphere and stated that the directive was misinterpreted. CBN merely sought to prevent governmental facilities from dealing in crypto transactions which could affect the usage and value of their fiat currency in the long run.

Nigeria is set to recognize crypto legally.

Many speculate that this change of heart was brought about by the recent advancements of South Africa, being the first African country to establish crypto regulations. Whatever the reason Nigeria recently announced its interest in passing a bill that will legally recognize cryptocurrencies and bitcoin.

Nigeria still holds one of the most effective crypto adoption rates in Africa. Its government and Central Bank have taken notice of this untapped revenue source. The Investment and Security Act 2007(Amendment) Bill has passed its second reading. The Security and Exchange Commission (SEC) will recognize cryptocurrency and other digital assets as capital for investment if it is passed into law.

This initiative comes after Nigeria announced limits on cash withdrawals for individuals and businesses to accelerate using alternate payment methods. The Central Bank of Nigeria went as far as establishing new limits on over-the-counter withdrawals. The new limits were set for $225 per week for individuals and businesses at $1123.

Also, Read How the Federal Reserve affects the entire cryptocurrency market.

Africa’s crypto ecosystems have steadily improved over the years, and with Nigeria joining, it shines a light on the current crippling crypto industry. According to the House of Representatives Committee on Capital Markets and Institutions chairman Babangida Ibrahim, the bill seeks to regulate digital currencies. Essentially establish rigid rules where both Nigeria and its citizens can benefit. He also stated that that t is an initiative to enable Nigeria to keep up with global practices ensuring that it stays in sync with the upcoming Industrial revolution.

Wrapping up

As Nigeria joins one of the few African countries to embrace digital assets, Africa’s crypto ecosystem will steadily expand. The steady adoption will inspire other African countries to take the next step to increase cryptocurrency within its economy. Despite the recent bad news surrounding the crypto industry, the Central Bank of Nigeria finally accepting digital assets into their economy is a sign of hope for the crypto industry.

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