The Central Bank of Nigeria (CBN), on the 5th of February 2021, instructed the identification of individuals and platforms engaged in cryptocurrency transactions with the aim of stopping its trade and facilitation. The CBN’s stance may be justifiable, as there was a growing risk and the perceived need to control what seemed like an off-the-radar path to escaping financial regulation through cryptocurrency transactions. This decision however sparked outrage, controversy and some setbacks for the rapidly growing financial technology sector, which is said to have attracted more than $600 million in foreign investment between 2014 and 2019.
In what was perceived as an attempt to cushion the crackdown, the e-naira was launched on the 25th of October 2021 as a Central Bank Digital Currency (CBDC), issued and regulated by the apex body and pegged to the value of the naira. Although a CBDC is not a cryptocurrency, it is best described as a crypto-asset or digital asset. So, within one year, the CBN clamped down on the country’s bustling cryptocurrency engagements, it also became the first African country to own a national digital currency.
Following this on May the 11th, 2022, the Securities and Exchange Commission (SEC) published rules on the issuance, offering and custody of digital assets on its website. The 54-page document targets sponsors, issuers, domestic and international platforms that facilitate digital asset transactions, including cryptocurrencies. In what seemed to be a coincidence, these new guidelines came immediately after the Managing Director of the International Monetary Fund (IMF), Kristalina Georgieva urged countries to look into the digital future and adopt public digital platforms to connect payment systems. She emphasised that even though the risk of fragmentation exists, it is worth exploring the idea of a platform that connects diverse forms of money for different categories of people in all countries.
With a gradual trend of corporations keeping cryptocurrencies as assets, even declaring the same on their balance sheets, it is clear that the mindset is tilting towards wider acceptance, despite sanctions to discourage full adoption. H. Pierson Associates commends SEC for its new guidelines that will strike the balance between regulatory standards and cryptocurrency operations in Nigeria. It is recommended that conventional financial institutions acquire the requisite knowledge to fully harness the benefit and opportunities of digital assets. This recommendation is imperative because, with a crypto-vibrant youthful population such as ours, liquid currency advocates can only gain fewer counterparts.
Dr. Awele Victoria Ohaegbu is a consultant with H. Pierson Associates Limited.