Nigeria’s lawmakers think bitcoin is one big financial scam

Good or bad?
Good or bad?
Image: Reuters/Dado Ruvic
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The bitcoin boom in Nigeria is drawing opposition from its lawmakers.

The senate has asked Nigeria’s central bank and other regulators to “investigate the proliferation of bitcoin” and do more to educate citizens about ”the dangers” of the cryptocurrency.

Much of the lawmakers’ fears are based on recent events after Mavrodi Mundial Moneybox (MMM), a Russian ponzi scheme, became popular in Nigeria snapping up over two million users. After a strong run, during which the scheme awarded users with 30% interest rates per month, it collapsed in December 2016. Nigeria’s central bank estimates that users lost $50 million. In a bid to bounce back, MMM’s adminstrators urged what was left of its user base to trade in bitcoin rather than cash. It’s likely that the early association between the ponzi scheme and bitcoin tainted the cryptocurrency in the minds of many. That much was clear as lawmakers described the bitcoin using words like “a financial scam” and “unethical.”

In any case, the lawmakers concerns might be a little too late as bitcoin trading in Nigeria has skyrocketed with weekly bitcoin trade volume surpassing 1 billion naira ($2 million) in August 2017 on LocalBitcoin, a global bitcoin exchange. Local bitcoin exchanges have also emerged to serve a quick growing market. Beyond the formal exchanges, peer-to-peer trading via private groups on messaging apps has also become prominent.

While some speculators have tried to cash in on bitcoin’s recent price surges, for many Nigerians cryptocurrencies have proven popular for practical reasons. Bitcoin and other cryptocurrencies offer a way to get around the various restrictions and regulations on dollar transactions over the last 18 months by Nigeria’s central bank. For example users will pay for services online and send payment internationally using bitcoin since there were limits to how much naira could be exchanged for dollars at reasonable exchange rates.

The lawmakers’ motion comes just as Nigeria’s central bank appeared to be taking a more positive outlook to cryptocurrencies and began researching possible policy proposals in Oct. 2017. That’s in stark contrast to its stance back in Jan. 2017 when it warned local banks against trading in cryptocurrencies citing the danger of  “money laundering and financing of terrorism.”

Elsewhere in Africa, last week, Kenya’s central bank governor dissuaded the growing uptake of bitcoin saying investing in the cryptocurrency is “dangerous”. Meanwhile, in Zimbabwe, citizens have turned to bitcoin as a store of value in light of the country’s struggling economy and banks’ limitations on transactions.