Like Nigeria’s multiple exchange rates which the Central Bank of Nigeria (CBN) has battled to converge in the last five years, crypto-trading in Africa’s largest economy may ride on the CBN’s policy banning financial institutions from transactions involving crypto exchanges, to boost informal trade.
As more cryptocurrency traders in Nigeria find ways to navigate the impact of the CBN’s policy, analysts polled in a Businessday survey reveals that there has been the birth of a new informal trading market, Abokicrypto, similar to the parallel market where most Nigeria access the US dollar, Abokifx.
“We are likely to see the emergence of an unofficial channel of crypto-trading. A channel as we have in the FX market, that the CBN can’t control,” Yinka Ademuwagun, research analyst at United Capital, said.
While individual traders are already finding ways to transact cryptocurrency while receiving funds into their local accounts, exchange platforms like Binance and Buycoins appear to be joining the new informal market. Both have announced the resumption of deposits and withdrawals. They are both offering peer-to-peer services to their users.
“It is like trade by barter; if I want to sell any of the cryptocurrencies in my wallet, I just have to find someone who is interested, and then I make my transfer to the person and they also transfer me my money,” a crypto trader said on the condition of anonymity.
Bundle, a Binance-backed local exchange also said it is building its peer-to-peer platform.
“We will work on creating a mobile-first peer-to-peer platform that will allow you to swap assets with other Bundlers quickly, securely, and simply,” Yele Bademosi, CEO of Bundle said, adding that the CBN ban “has the potential to derail the growth of a vibrant, nascent and thriving ecosystem.”
According to him, as opposed to restricting financial institutions from working with crypto companies “we should be working to enable it as a country.”
Before the ban by the CBN, Nigeria was recognised as a hot spot for cryptocurrency as the search for an alternative to the naira, a national currency prone to depreciation pushed many Nigeria, mostly the youth, who are tech-savvy to find various use cases for the decentralised digital currencies, from trading to making a living.
While the policy by the CBN does not stop Nigerians from dealing in cryptocurrencies but prevents financial institutions from allowing transactions with cryptocurrency, industry players believe peer-to-peer trading will operate in a way that the CBN would not know that their transactions have anything to do with cryptocurrency.
“A simple way is to disguise the name of the transaction because what this means is that banks will start to set-up their system to flag keywords in the crypto-currency space. If l don’t use that keyword probably the transaction won’t be a flag,” a market analyst said.
With the birth of the CBN induced peer-to-peer transactions, where two users connect directly to each other to trade cryptocurrency in return for bitcoin or other cryptocurrencies, analysts believe the CBN has taken five steps backwards from cryptocurrency advancement currently being embraced globally.
“We will have abokicrypto,” Ademuwagun said, adding that “it’s a setback.”
By the time CBN reviews and comes up with a policy to regulate the cryptocurrency in Nigeria, industry players fear that the sector would have advanced with its peer-to-peer transactions and would be difficult for the regulator to take control of things.
This, according to analysts, will create a gap between the formal and informal market as it is currently the case with multiple dollar-naira exchange rate.