When the Central Bank of Nigeria’s order barring banks from enabling cryptocurrency transactions was issued on Feb. 5 2021, the Nigerian naira was exchanging at 381 naira against the dollar. A year later, the official rate is N416 and averages N560 on the streets of Lagos.
Last October, a report on crypto adoption in 154 countries placed Nigeria in 6th place, part of a wave which saw a 1,200% growth (by value) in crypto traded in Africa. This increase was driven by peer-to-peer trades on platforms like Paxful, and LocalBitcoins, and on WhatsApp, and Telegram.
In other words, the naira has become weaker and more Nigerians use crypto now than before the ban.
Crypto exchanges have adjusted to the new reality in different ways. Patricia, an “Africa-centric integrated alternative payment and e-commerce company that facilitates the easy use of digital currencies” relocated its headquarters to Estonia, a crypto haven. Buycoins, which allows trading in African currencies, began advertising on wide billboards in Lagos. Binance, the world’s largest cryptocurrency exchange by volume, took up slots on electronic billboards at the just concluded Africa Cup of Nations.
Will the CBN ever change its aversion to what these companies sell? Quartz spoke with Owenize Odia, Nigeria country manager for crypto exchange Luno, for a view of what it would take for crypto to become normalised in the country. The interview has been edited for clarity and length.
What kind of users have you had in the past year since the ban?
The ban sort of affected our transactions because before the ban, a lot of people were doing fiat on and off ramp – buying crypto with the naira, or selling and withdrawing with the naira. But a lot of Nigerians found a way to transact without the fiat leg.
What was the other way they found?
A number of providers enabled peer-to-peer trades. What we have done recently is to launch vouchers that customers can buy, convert to naira, and deposit into their wallets to buy crypto. To withdraw, they also have to buy a voucher that cashes out with their bank account.
Going back before the ban, what did people use crypto for?
Firstly it was about trading; customers bought at lower prices to sell at a higher price. But we had people using it for micropayments. As Nigerians, we know that many international merchants decline transactions originating from Nigeria and a few other African countries but paying with crypto has become an option with some merchants. People also bought crypto to diversify their portfolios and hold it until it appreciates. Luno, for instance, has a savings option that lets users earn 2% interest on their crypto.
Countries are now exploring central bank digital currencies (CBDC) as a counter to cryptocurrencies, but are they a threat to crypto?
I don’t see CBDCs as a threat but as a welcome development because more eyes are open to the digital economy, particularly through blockchain technology. I believe that the eNaira, for instance, can co-exist with cryptocurrencies. Even with crypto on the rise, people still used fiat currencies, and so with the eNaira I want a situation where it can be used alongside crypto.
You are being altruistic and optimistic about this, but Nigeria’s central bank governor does not want that co-existence.
They have their concerns around transparency and consumer protection. What we have to do is more education to stakeholders about what cryptocurrencies can bring about. And this is necessary because, if we are being honest, cryptocurrencies cannot be stopped.
Because it is like trying to control the internet. It cannot be done. Crypto use cases are also increasing by the day, and countries are beginning to officially adopt it. Google ranked Nigeria in first place on searches for bitcoin even after the ban. So the focus should be on consumer protection, and one way to ensure that is to only allow licensed providers to operate, the way only a few companies are allowed to issue bank accounts.
Does that mean you are for regulation?
Yes, and we act like we are already regulated. Customers need to provide KYC details to be onboarded and we carry out enhanced diligence to ensure we don’t have people of the underworld signing up to enter the crypto space. So yes, regulation will bring transparency, protect consumers and businesses, and bring clarity to the economy.
Do you currently operate with a license in Nigeria?
We don’t have a license right now but we are registered with the Nigerian Financial Intelligence Unit [the central bank’s anti-money laundering unit] and report suspicious transactions to it. We self-regulate so that when regulation comes, we would have checked all boxes.
We are looking for a collaborative approach, a situation where we sit down with regulators and they list their demands. Because the way back for crypto in Nigeria is regulation. As much as crypto cannot be stopped, the ban has driven people to underground transactions on WhatsApp and Telegram. That’s where people of the underworld take advantage to carry out scams. With CBN regulation, only licensed providers will operate, cutting off the scammers. In the end, it is about consumer protection.
Finally, if the status quo remains a year from now, is it a good or bad thing for Luno?
The CBN knows that people are still transacting crypto.
So you are indifferent?
No, I am concerned but I am certain that crypto is here to stay. That’s the truth.
An earlier version of this article said Luno enabled peer-to-peer trades. The company did not.
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