Nigeria's Central Bank Explains Its 2021 Ban on Cryptocurrency Transactions at B...

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In 2020 Nigeria had the third-most cryptocurrency transactions in the world (behind the U.S. and Russia). But "Nigeria's history with crypto has been a bittersweet one where the citizens have embraced digital assets with open arms but the government remains vehemently against it," writes the site Bitcoinist.

In early 2021 the BBC reported that "In an effort to regulate the market, Nigeria's central bank banned banks from facilitating cryptocurrency-related transactions in 2017, but the ban remained largely unenforced. However, this year the institution doubled down on its stance."

In a statement released on 7 February [2021] it cited the need to protect the general public and safeguard the country from potential threats posed by "unknown and unregulated entities" that are "well-suited for conducting many illegal activities". Since then, many Nigerians have reported that their bank accounts have been frozen due to cryptocurrency-related activity...

However many investors with the possibility say they will continue to trade using their overseas bank accounts. They say they can easily revert to peer-to-peer transactions. This means that rather than transferring funds between a financial institution and a cryptocurrency online trading platform, investors transfer funds directly to each other or through a middle person as they buy and sell. This is the method the cryptocurrency community used before the development of the virtual currency marketplace ecosystem in Nigeria...

At the heart of the rise of Bitcoin is a distrust of centralised financial systems and top-down economic control, investors say. Many express their frustrations with government policy and the decline of the Nigerian economy.

This week the Lagos-based Nigerian newspaper The Nation published this explanation of that crackdown from the Central Bank's deputy governor, Kinsley Obiora. "When the central bank started reacting to COVID with what we call printing money and responding to the crisis, a lot of people in the private sector felt that printing of money could lead to hyper-inflation and these private sector people decided to respond by creating cryptocurrencies." Over time, the creators of cryptocurrency, he added, felt that central banks should not be left with the authority to do whatever they like with money. Fearing that such a mindset might cause inflation and reduce the purchasing power of households, the CBN he said responded to what he called "the good aspect of that change because a lot of people actually took to crypto currencies". Fed up with the antics of the cryptocurrency operators, Obiora said the "we kicked them out of our banking system because the opacity of the system is still a threat to financial system stability".

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