The Central Bank of Nigeria (CBN) banned banks from facilitating crypto exchanges. It passed the ruling on February 5 along with orders to close down bank accounts used for crypto trading.
But despite the ban, bitcoin exchanges continue in the country. Experts on what is blockchain explain bitcoin’s status in Nigeria and how the ban opened new avenues of investment and trading outside the country.
Nigeria Is the Second Biggest Bitcoin Market in the World
Nigeria has traded more than 60,000 bitcoins since 2015. This volume, which amounts to more than $566 million, is second only to the US.
Bitcoin exchanges reached their highest surge of 30% in 2020 due to the COVID-19 pandemic. Paxful, a major peer-to-peer (P2P) bitcoin marketplace, found a 137% rise in new registrations in the country from January to September.
In P2P exchanges, the buyer and seller decide on the details of their deal directly. For instance, an investor can put up an offer for their bitcoin on a blockchain platform. Interested buyers are free to bid for it. The entire process is not subject to any kind of government regulation. So it gives Nigerians more opportunities to build wealth.
Nigerians make up a quarter of Paxful’s users. According to the company, most customers use the platform for remittances as well as arbitrage and P2P trading.
Why Nigerians Are Turning to Bitcoin
The blockchain market is thriving because of the uncertainty around the Nigerian naira. There were increasingly divergent exchange rates over the years. They were caused by the country’s efforts to “protect” the naira and regulate foreign exchange supplies. As a result, Nigerians turned to the more stable cryptocurrency trade.
How Bitcoin Powered a Protest
Some crypto industry players suspect that the CBN’s ban is related to the police brutality protests last year. In October, the government tried to keep protesters in line by restricting them from using local payment platforms to collect donations.
The tech-savvy protesters countered that obstacle by switching to using bitcoin. The donations amounted to almost $400,000, about 40% of which come in the form of cryptocurrency.
This event solidified the fact that digital currencies are helping Nigerians navigate their country’s restrictive financial system.
The Aftermath of the CBN Crypto Exchanges Crackdown
Bitcoin trading skyrocketed to $80,000 after the CBN ban. This is $20,000 higher than the digital currency’s global price of $52,000. Crypto industry experts predict that it will only continue to increase.
In addition, more Nigerians are relying on P2P trading to carry out crypto exchanges following the crackdown. Cryptocurrency websites and trading platforms adjusted to the demand. For instance, Binance added naira to its P2P market section as a fiat asset several days after the ban.
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