There’s a number of things we cannot ignore as a country. Firstly, the nation’s dwindling purchasing power. Devaluation and Inflation are two thorns in the flesh of nigerians. Over the last few years, there have been a few ways for Nigerians to overcome these challenges.
These thorns have pushed Nigerians into saving and investing predominantly in dollars or dollar denominated assets, which has had an even further negative influence on the value of the naira, and investing in cryptocurrencies. Cryptocurrencies on the surface offer a store of value, but also offer outsized returns when compared to traditional financial investment instruments like money market funds and equities and are extremely risky and unregulated.
On the surface it seems that the institutional bodies like the CBN (Central Bank of Nigeria) and the SEC (Securities and Exchange Commission), are crypto averse. At the height of the Central Bank ban on banks interacting with cryptocurrency companies last year, tensions were high, and there was uncertainty on the way forward. One year later, the path is still unclear, so what lies next?
Firstly, the school of thought that posits that regulation needs to be brought into the cryptocurrency space is absolutely correct. The elephant in the room should be who is the APEX body regulating these entities. Are cryptocurrencies securities, or is this a matter of national security that should be handled by the apex bank?
The answer lies somewhere in between. On the surface, the CBN should set out clear guidelines on anti-money laundering, privacy, capital requirements of operators and most importantly initial audits. The SEC should be involved in the granting of licenses after the initial CBN frameworks are established. The SEC should also closely be responsible for monitoring promotional activities, acting as the ombudsman when there are complaints and ensuring that education and proper customer profiling are carried out before this extremely risky asset class is served to certain groups of people.
Looking ahead, the future is bright. There are ongoing conversations between industry players and these regulators, and the word on the grapevine is that the rules will be updated soon. In the interim, private players have continued to innovate, spurring some of the largest and most effective peer-to-peer networks.
These networks are not without their risks, and it is now more important than ever that there is a supreme regulatory body keeping a keen eye on this “wild wild west” market. Nigeria can stay ahead and increase revenues by embracing the proponents of blockchain technologies, instead of shunning them.
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