Nigerian banks allegedly close accounts dealing with Crypto


Amid Nigeria’s apex bank’s recent warning to Deposit Money Banks, Non-Financial Institutions, and other financial institutions against doing business in crypto, Nigerians transacted more Bitcoin in comparison to other African countries combined in the past week.

According to a recent study seen by Nairametrics, data retrieved from Usefultulips (a Bitcoin analytic data provider) revealed that the use of Bitcoin for peer to peer lending in Nigeria surged by 15.8% since the CBN directive took effect about six days ago.

Nigeria led the pack with about $7.35 million in P2P trading on LocalBitcoins and Paxful, while the closest rival, Kenya, had a transactional value of just $2.86 million during the past week. South Africa came in third with a transactional value of $2.38 million.

In a circular dated 5th February 2021 and distributed to regulated financial firms, the apex bank of Africa’s largest economy warned local financial institutions against having any transaction in crypto or facilitating payments for crypto exchanges.

In addition, the apex bank instructed the financial institutions to immediately close the accounts of such persons or entities transacting in or operating cryptocurrency exchanges.

The apex bank further warned Nigerian financial stakeholders that any breach of this directive would attract serious regulatory sanctions.

Changpeng Zhao, leader of the world’s biggest crypto exchange, Binance, anticipates that the Nigerian banks would stop working with crypto exchanges in line with the Nigerian central bank’s directive, meaning P2P trading would likely flourish as a result.

He further advised Nigerian customers to withdraw their local denominated deposits as early as possible to avoid potential channel issues.

That being said, many crypto pundits are of the opinion that although the Central Bank’s recent directive does not criminalize ownership of crypto, the circular will however make it difficult for them to process debit, credit card, and bank transfer transactions.

Adebayo Juwon, African Lead at FTX, a leading crypto exchange, in a note to Nairametrics, had this to say:

“It is important to clarify that CBN didn’t ban crypto in Nigeria; they simply asked Nigerian financial institutions not to process crypto payments pending regulation.”

What you must know: In Bitcoin’s case, peer to peer is the exchange of BTC between parties (such as individuals) without the involvement of a central authority. This means that peer to peer use of BTC takes a decentralized approach in the exchange of Bitcoins between individuals and groups.

It shows that Bitcoin’s long-running narrative as the “digital gold” for hedging against global economic turmoil is gaining the trust of Nigerians for payments and transfers.

Bottom line

Tech-savvy Nigerians are leveraging on Bitcoin amid recent CBN directives warning Nigerian financial institutions against dealing with crypto, to sustain and drive their earnings via peer-to-peer transactions, as it offers the cheapest medium of moving capital in relation to other traditional means of payments.

Source: Nairametrics

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