Bitcoin trading in Nigeria has remained active due to the convenience of peer-to-peer transfers. These transactions have increased despite the central bank’s ban on crypto transactions in the banking sector.
What are the exact figures?
The main crypto trading platforms in Nigeria are LocalBitcoins and Paxful. Compared to January and February this year, the value of bitcoin on these two platforms increased from $32 million to more than $44 million in August.
Most of the transactions are taking place on Paxful, which has 1.5 million users in Nigeria. According to Ray Youssef, the co-founder and CEO of Paxful, 46% of all African users on the platform are between 25 and 40 years old. Another 41% are between 18 and 25 years old. Through its Paxful’s Built With Bitcoin Foundation program, the company has so far built 6 schools on the continent.
Reasons for the Nigerian cryptocurrency wave.
Cryptocurrencies are popular in Nigeria and other African countries for several reasons.
- Users are more focused on wealth
- The impact of inflation has affected the Nigerian Naira, prompting residents of the country to look for alternative ways to secure their income
What are the regulations for cryptocurrencies in Nigeria?
In February this year, the Central Bank of Nigeria (CBN) ordered all banks to close accounts that deal in cryptocurrencies. According to the CBN’s letter, regulated institutions are prohibited from facilitating payments for digital coin exchanges. Furthermore, all those who violate this order will face severe sanctions.
In another press release, the financial institution pointed out that virtual currencies are not legal tender in Nigeria. Therefore, investors and traders of cryptocurrencies are not protected by the law.
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Nigerian users have used formal peer-to-peer platforms to continue trading.
Are there more plans?
Just like China, the Central Bank of Nigeria is also planning to launch its own digital currency, eNaira. This virtual currency is set to launch on October 1 and could replace all other cryptocurrencies in the country. It could also hold up regulation for various platforms.
Fintech company Bitt Inc. has been selected as a technical partner for the digital currency project.
The head of the central bank sees the benefits of the Central Bank Digital Currency (CBDC) as follows:
- Cheaper and faster remittances
- Increased cross-border trade
- Tax collection
- Accelerated financial inclusion
- Improvements in monetary policy
It will be interesting to see how the country handles this new cryptocurrency.