While a growing number of countries have adopted Bitcoin and other cryptocurrencies to some degree, the rest either are undecided or rule out the use of digital innovation.
A new report says that the Nigerian government might crack open the door for crypto legalization, and a form of CBDC.
Nigeria To Create Crypto Regulations
Nigeria is looking to pass a new bill to recognize and legalize Bitcoin and cryptocurrencies, says a report by Nigerian popular news outlet Punch Newspapers.
The news is based on the recent statements of Babangida Ibrahim, Chairman of the Capital Market and Institutions Committee.
According to the Chairman, the chamber plans to amend the Investments and Securities Act, 2007 Bill with legislation to, “recognize cryptocurrency and other digital funds as capital for investment.”
The new bill, if passed, will add Nigeria to the list of countries to embrace cryptocurrencies, thereby potentially relaxing certain restrictions on crypto-involving companies in compliance with the country’s regulations.
Ibrahim emphasized that it’s necessary for the country to stay current with, “global practices.”
However, the former President of Nigeria noted that the government will not likely overturn the ban, instead, the country seeks to selectively internalize some developments to the legal framework.
“It is not about lifting of the ban, we are looking at the legality: what is legal and what is within the framework of our operations in Nigeria.”
The Central Bank of Nigeria (CBN) imposed a prohibition against crypto activity in February 2021. Crypto service providers were forced to close their operations while banks were ordered to detect and shut down all the accounts of any individuals or entities engaging in trading activities.
Underbanked People Don’t Care About Banks
The major problem with enforcement lies in the status quo that most of the crypto investors don’t use bank accounts, which challenges the central bank’s efforts to track them.
Ibrahim asserted that regulation needs to apply to those cases and the government is assessing how to fit it into its legal framework.
The new proposed law will also clarify the role of the Central Bank of Nigeria and Nigeria’s Securities Exchange Commission (SEC) in providing and regulating digital currencies.
eNaira Uptake is Discouraging
Nigeria has been in pursuit of a cashless payment system since 2012 as the country seeks to achieve a more effective payment system with reduced bank fee costs.
The idea of Nigerian digital currency is an alternative to traditional fiat currency.
Nigeria was among the early issuers of central bank digital currency (CBDC), launching the eNaira earlier in October 2021. But the project performance failed to meet the governmental expectation.
Over a similar period, the eNaira’s adoption rate only reached below 0.5%, as reported by Bloomberg.
People Want Real Money
The government in Nigeria is struggling to convince residents to adopt CBDCs. Bitcoin adoption, on the other hand, has grown significantly despite regulatory warnings of the high-risk aspect of cryptocurrencies.
As reported, there are more Bitcoin transactions in Nigeria today than in any other market in the world, reflecting the people’s crisis of confidence in the current financial system.
Nigerians are turning to cryptocurrencies as a result of the depreciating Naira and the inflationary mess.
The Nigerian government decided to strengthen the prohibition in response to the widespread Bitcoin situation out of concern that the market would bust a bubble. Several Bitcoin players’ bank accounts have been locked starting in February 2021.
Despite this, Bitcoin speculators in Nigeria remain undisturbed since holding virtual currency is more profitable than holding real cash. Instead of using trading platforms, they switch to an intermediary to transfer virtual currencies.
The discouraging scenario of CBDC adoption could be a warning for other countries currently exploring the possibilities of CBDCs. France is testing CBDC for bond issuance, Kazakhstan is testing CBDC on BNB Chain, and India is planning to pilot the CBDC project by the end of this year.