Godwin Emefiele and CBN's Unwanted Cryptocurrency: Three Reasons it Matters

Godwin Emefiele and CBN's Unwanted Cryptocurrency: Three Reasons it Matters

  • There are fears that the Federal Government could end up borrowing from the savings of Nigerians who buy the country's digital currency
  • Before the end of October, the Central Bank of Nigeria is expected to make available, the country's official digital currency
  • There are several reasons tied to the decision of the financial regulator to provide Nigerians with an alternative to bitcoin or other cryptocurrencies

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Three, is the number of warnings that the Central Bank of Nigeria (CBN) have issued against the cryptocurrency market, but the regulator is now looking to compete in the market it has chastised.

According to circulated reports, the CBN is looking to give Nigerians an independence day gift in October 2021, in the form of Nigerian-government backed digital coin (NIGCOIN).

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This move by the CBN comes as a surprise as head, Godwin Emefiele, had described cryptocurrency as fund used for illegal businesses such as terrorism.

CBN to launch Nigeria's digital currency in October
The Central Bank of Nigeria. Photo: STR/AFP
Source: Getty Images

Legit.ng had earlier reported the intention back in June 2021. While this means Nigerian banks will be partaking in cryptocurrency trade, some Nigerians are worried about freedom and safety of their investment.

Nigerian bitcoiners don't want a Greek gift

The CBN might be launching Nigeria's digital currency into an uninterested cryptocurrency market as some Nigerian bitcoin holders and prospective bitcoiners told Ripples Nigeria that the apex Bank crypto nullifies the essence of cryptocurrency.

It was gathered that persons invest into bitcoin and other cryptocurrencies due to the security it affords them as their transactions are anonymous and unregulated.

According to Seun Shotunwa, a digital market and website designer, investing in CBN will take away the freedom they enjoy with bitcoin.

This is the problem Emefiele initially had with cryptocurrency. It renders the financial regulator redundant in the crypto market, and this is what the CBN plans to change with the Nigerian digital coin.

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But aside from the freedom issue, the government will also be facing trust issue with Nigerians, a Media Publicist, Famuyiwa Damilare, stated this.

Famuyiwa said:

"If I wanted to invest in any cryptocurrency, it wouldn't be that of the CBN, because I'm not crazy."

He said for a government like Buhari to ban cryptocurrency for reasons best known to them, there's no assurance that another government won't come to ban the NIGCOIN.

Famuyiwa further stated that:

"I see no reason why they (CBN) banned cryptocurrency. They are trying to monopolise the cryptocurrency market which is bad for business.
"And we are in Nigeria where we have trust issues with the government. Just recently we had they wanted to borrow from the pension funds. What if they decided after that they want to borrow from the cryptocurrency they created?"

Aside from Shotunwa and Famuyiwa, there are other Nigerians who have commented their reservations on the NIGCOIN on social media, but the CBN is going ahead with its plan and has partnered with industry stakeholders to enable October launch possible.

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Why is CBN going ahead with an unwanted crypto?

Despite the criticism that has trailed the decision to launch a government-backed digital coin and Emefiele's constant rebuke of the crypto market, here are some reasons Ripples Nigeria believes the CBN is going ahead.

CBN can't beat bitcoin, so Emefiele joined them

Emefiele has been warning about a doomsday since 2017, 2018 and 2021, stating that the exchange platforms are unregulated and investors could lose their money to collapsed exchanges, or in the case the owners close their businesses.

But through the three warnings, bitcoin has continued to prove Emefiele wrong.

The first warning dates back to January 12, 2017, when one bitcoin was valued at $921.35, and the financial regulator followed up with another on February 27, 2018.

At the time, bitcoin value had appreciated to $10,903.02, according to Statista - this is a growth of 1,083.3 percent as the value gained $9,981.67 within twelve months [2017 to 2018].

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Fast forward to February 2021, the same months that the CBN officially banned banks from transacting with cryptocurrency exchanges, bitcoin value had risen to $46,642.61.

Although, bitcoin currently trades at $33,786.35, but the crypto is 3,567.04 percent above its value when the CBN first released its warning against bitcoin and other cryptocurrencies.

As the value appreciates, Nigerians continue to trade bitcoin despite the ban. The transactions volume rose by 8.71 percent between May and June this year.

Bitcoin worth $38 million was traded by Nigerians last year, against the $34.92 million recorded in May - this makes Nigeria number one in Africa’s bitcoin transaction.

CBN ban has failed to stop Nigerians from trading bitcoin, and with the number of volume growing in Nigeria, the apex bank is looking to tap into the market.

Cryptocurrency taking over Nigeria's remittance, cutting CBN/FG gains

Nigerians are gradually shunning the official remittance channel for cryptocurrency due to its cost-effective transaction and lack of government regulation.

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In April, the Association of Bureau De Change Operators of Nigeria (ABCON), asked the CBN for measures that would prevent the use of cryptocurrencies for Diaspora remittances.

In 2020, when bitcoin and othercryptocurrencies received a boost in Nigeria, the World Bank stated that the country's remittance inflow declined by 27.7 percent during the same period.

But according to Accountant, Feyi Fawehinmi, in a tweet, remittances didn't drop as widely reported, because Emefiele and the CBN's policies have couraged Nigerians to find more smart ways to send money home without government realising.

To him, cryptocurrency and swapping of money, inform of peer-to-peer, have reduced remittance inflow on the official CBN channel.

The founder of Paga, Tayo Oviosu, buttressed this point by stating that:

"Even a Bank MD told me he is using informal channels to send abroad."

So offering the Nigerian digital currency in place of bitcoin and other unregulated cryptocurrencies is an attempt to mop up the remittances passing through the crypto market and other informal channel.

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To support CBN's Naira for dollar scheme

Launching the NIGCOIN has become necessary for CBN following the introduction of the Naira for dollar scheme initiated to encourage Nigerians to embrace the formal market.

The scheme was introduced in March and expected to end in May, but the CBN has extended it until further notice to block the loopholes in the diaspora remittances channel.

Both the scheme and NIGCOIN will combat the declining remittances caused by bitcoin and other cryptocurrencies.

Elon Musk hints on Tesla backing bitcoin again

Elon Musk, the founder of automotive manufacturer, Tesla, has said Tesla is still open to accepting bitcoin as a payment option for ita vehicles.

Musk said once bitcoin miners are able to increase their renewable energy usage, and drop their dependence on fossil fuels, Tesla will start backing the crypto.

Back in May, the tech guru had announced that his company would no longer accept bitcoin due to its energy use impact on the environment.

Source: Legit.ng

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