Earlier this month, Nigeria’s Securities and Exchange Commission (SEC) issued a 54-page document titled ‘New Rules on Issuance, Offering Platforms, and Custody of Digital Assets’. Paving the way for the future legitimization of cryptocurrency in a country struggling with the economic repercussions following the pandemic, the move by the SEC is one welcomed by the already 33 million-strong Nigerian crypto investor community.
The recent action taken by Nigeria’s SEC came as a surprise to many given the Central Bank of Nigeria’s (CBN’s) supposed outlawing of the technology altogether in 2021. The move is one that will finally bring about state legitimization of a technology that can serve to eliminate barriers to finance in a country where 36 percent of adults are financially excluded and often without bank accounts.
With soaring inflation in the country (currently at 16 percent), it should come as no great shock that millions of Nigerians have already flocked to crypto to serve their daily needs. Despite often being used as a hedge against inflation, many have simply turned to blockchain technology to facilitate everyday payments whilst the Naira continues depreciating, sending money abroad (and receiving it instantly) and for investment purposes.
Ongoing problems with the e-Naira, Nigeria’s central bank digital currency have not improved longstanding issues in the country such as financial market access, with many turning to crypto instead.
According to Bloomberg, Nigeria is the world’s second-largest cryptocurrency player in terms of volume of transactions, second only to the US. The thriving nature of crypto in a country where it was essentially outlawed illustrates that the Nigerian appetite for crypto is as strong as ever.
The benefits of crypto are clear and thus the continued approach taken to it by the CBN is outdated and unwanted by millions seeking economic empowerment and further social development. It is imperative that we help tech-savvy, youthful populations across Africa as best as we can if we want them to reach their true potential and help modernize the world’s most youthful continent where over 60 percent are aged 25 and under.
The new framework introduced by the SEC has an array of features designed to mitigate risk in terms of foul play when it comes to cryptocurrency. For example, businesses looking to offer any sort of crypto products or services in Nigeria or to Nigerians must now secure a virtual asset service provider (VASP) license in addition to relevant category licenses. Moreover, the SEC will now have records of all crypto exchanges providing a service to Nigerians for maximum transparency.
I believe this is a solid step in the right direction when it comes to embracing crypto and blockchain technology in a country lagging behind others on the world stage. State-level action like this, will help enable the Fintech sector to go from strength to strength and further empower young entrepreneurs in the country.
The Brookings Institute has noted the potential of crypto technology when it comes to facilitating innovation and that restricting it would ‘undermine financing of critical sectors like micro, small and medium-sized enterprises.
Continuing restrictive policies thus could limit foreign direct investment (FDI) into supposed tech hubs in Africa such as Lagos. This could essentially result in a new Silicon Valley without silicon.
Empowering those such as smallholder farmers with access to markets and information pivotal for their business success requires technology and the likes of the blockchain.
Blockchain’s growth over recent years, combined with an increasing smartphone and mobile phone rollout across the continent, has been coming for some time. Action by the likes of the SEC is therefore the potential green light for Africa’s post-pandemic economic resurgence.
A report by the African Development Bank (AFDB) released last month highlighted the ongoing frustrations of younger people when ‘arbitrary government policies are enacted’ such as banning crypto. Like so many other restrictive policies and challenges facing these people, they have often found ways around it, but this recent move by the SEC is a positive step in providing a helping hand to those seeking further empowerment.
It would now be appropriate for the CBN to work with the SEC in Nigeria to help bring about a modernized economic climate where crypto is not looked down upon. Instead, millions more will be able to use the technology in a safe manner without fear of unjust repercussions.
Cryptocurrency is here to stay, and like so many other technological developments of our time, it is vital that we embrace it and not work against it. Eliminating barriers to finance across Africa is a genuine priority for governments on the continent and crypto is one of the best ways we can catalyze Africa’s economic revolution.
By Chris Cleverly, President at Tingo International Holdings and CEO at KamPay