In an encouraging development for Nigeria’s crypto industry, the Central Bank of Nigeria (CBN) has lifted its controversial ban on banks facilitating digital transactions. This opens up new opportunities for growth and innovation in Africa’s leading crypto economy.
The initial banking ban, imposed in February 2021, was an attempt to clamp down on Bitcoin and the adoption of digital currencies in Nigeria. However, it unintentionally boosted peer-to-peer (P2P) trading. With the ban lifted, there is set to be renewed competition between the exchanges and P2P platforms.
According to Nathaniel Luz, co-founder of Nigerian crypto exchange Flincap, the CBN’s policy reversal signals that Nigeria is ready to fully embrace digital currency exchanges. He expects to see more crypto exchanges launching and targeting the Nigerian market.
During the ban, P2P trading experienced significant growth as users had no other options. However, the lack of institutional platforms limited the sector’s full potential. The re-opening of banking services removes a major bottleneck.
While Nigeria’s Securities and Exchange Commission (SEC) requires registration for crypto companies, industry players view this as a positive. Luz compares it to the recapitalization of Nigerian banks in 2010, which ultimately strengthened the banking system. Sensible regulation gives investors and users greater confidence.
Crypto’s Continued Rise In Nigeria
Nigeria has firmly established itself as a major force in the global crypto sector. It has the world’s second-largest P2P Bitcoin marketplace, behind the United States. Nigerian blockchain startups raised over $1.2 billion in funding in 2023.
With growing internet access and a large unbanked population, experts predict rapid digital currency penetration in the coming years. The CBN likely recognized that its ban was ineffective and that Nigeria risked falling behind in this technological revolution.
By embracing crypto, regulators can foster financial inclusion, innovation, and economic growth. Rather than an outright ban, the balanced regulation approach while allowing room for experimentation puts Nigeria on the right path. The digital currencies have a bright future in Africa’s largest economy.
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