There could be trouble for cryptocurrency speculators in Nigeria very soon. Head of Nigeria’s apex bank, the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, on Wednesday called cryptocurrency a “gamble”, and made it clear that “very concrete announcements” would be made soon concerning cryptocurrencies.
The CBN governor made this known during an interview with Bloomberg at his office in Abuja. He added that the CBN cannot “give support to situations” where people risk savings to “gamble”.
Bitcoin and cryptocurrency in Nigeria
This news does not come as a surprise. The CBN had previously warned people off investing in cryptocurrency, similar to how it warned about investing in MMM and other Wonder Banks some years back.
But unlike the case of MMM, the CBN can easily regulate digital currencies if it wants to; or finds reason to. And this is what spooks traders the most.
In January 2017, the CBN informed lenders not to invest or trade in cryptocurrency pending “substantive regulation and decision” by it. About a year later, not much seems to have been done by way of regulation; and cryptocurrencies like Bitcoin and Etherum have enjoyed continued investments.
Prices of Bitcoin, Etherum and Ripple have skyrocketed over the last year, but they drag with them a huge volatility risk. In mid-December, the market cap for cryptocurrency was $661.2 billion (in comparison, Nigeria’s GDP is $510 billion).
Cryptocurrency regulation elsewhere
Over the last two weeks cryptocurrency prices have reacted wildly to possible regulations in South Korea and China. And, on January 17, fear of regulation in Asia caused a massive sell off; cryptocurrencies lost over $200 billion that day.
Since December, talk of regulation has become louder than ever. And today, January 26, Russia finalised a federal law to regulate cryptocurrency trading. The law that seeks to regulate trading recognises cryptocurrency as a convertible asset. It would, however, restrict the total amount non-professional investors can invest in Initial Coin Offerings (ICOs).
Meanwhile in Nigeria, cryptocurrencies are in popular demand. According to Bloomberg, peer-to-peer transactions have risen almost 1,500% this year. So, if the cryptocurrency “bubble” bursts, Nigeria could be significantly affected, alongside Russia and New Zealand.
Now, it is not clear what regulations could be made by the CBN. Most trade occur on foreign platforms, and Nigeria is not exactly power-sufficient enough to be a hub for mining coins. Nevertheless, any regulatory measure is sure to be a huge deal for Nigerian traders.
If you’d like to get featured on our Entrepreneur Spotlight, click here to share your startup story with us.
Get latest Technology news, reviews, business-related content with a deliberate emphasis on the African narrative and insightful analysis in Nigeria – straight to your inbox.