How to Effectively Trade in Crytocurrency in Nigeria

In a widely circulated circular from Central Bank of Nigeria (CBN) to other financial institutions on the 5^th of February, 2021 asks regulated financial institutions to identity people, organizations or group of persons who are trading in cryptocurrency and close their accounts forthwith. In the circular, Central Bank of Nigeria (CBN) threatens severe regulatory actions on any financial institutions that refuse to adhere.

In going forward, we may need to understand what cryptocurrency is, how it started, advantages and disadvantages and the effects of the CBN policy on Nigerians and how they can boycott banks to further go ahead in trading in cryptocurrency in the country.  

A cryptocurrency is a digital currency in which transactions are verified and records maintained by a decentralized system based on blockchain technology using cryptography, rather than by a centralized authority. One of the features of cryptocurrencies is that they are not being controlled by any central authority making them immune to any Government interference or policies.

Cryptocurrencies are systems that allow for the secure payments online which are denominated in terms of virtual “tokens,” which are represented by ledger entries internal to the system. “Crypto” refers to the various encryption algorithms and cryptographic techniques that safeguard these entries, such as elliptical curve encryption, public-private key pairs, and hashing functions.

There are different types of cryptocurrency such as bitcoin, litecoin, peercoin, namecoin, EOS, cardano and ethereum but bitcoin seems to stands out from many of the above mentioned cryptocurrencies.

Bitcoin was launched sometimes in 2009 by Satoshi Nakamoto. It is believed that Satoshi Nakamoto is the name that was used as the creator of bitcoin cryptocurrency. Research and investigation has shown that there is no face attached to the name of the creator of the popular bitcoin making people to believe that it is either the currency was created by a person or group of persons and have decided to go with the pseudo name Satoshi Nakamoto.

The value of bitcoin in the market was around 146billion dollars and it was said that there were over 18 million bitcoins in circulation as at November, 2019.

In everything we do or venture into, we have to check the advantages and the disadvantages of such action, then, weigh which is higher and which is lower in terms of risk and the rest. So, in essence, there are one of two advantages and disadvantages attributed to the use of bitcoin which we are going to state out below for you to read and understand.

In looking at the advantages of cryptocurrency, it can actually operate without the use of your local bank or a credit company. It holds the promise of making it easier for you to move funds directly from one person to another person without involving a third party like your local bank or using your credit card company. These movements of funds are instead secured by the use of public keys and private keys and different forms of incentive systems like proof of work or proof of stake.

Public key is said to be the user’s wallet or account while the private key is said to be known only to the owner and it is used to sign transactions. Fund transfers are completed with small/minimal processing fees, making users to avoid the steep fees charged by banks and financial institutions for wire transfers.

In also looking at the disadvantages of cryptocurrency, it has a semi-anonymous nature which enables you to have a semi nature of privacy. One can’t easily trace the owner or the user of such account unlike your normal bank details that exposes the real face behind the account. It is also suited for a host of illegal activities such as money laundering and also enables one to evade tax.

However, cryptocurrency advocates often highly value their anonymity, citing benefits of privacy like protection for whistleblowers or activists living under repressive governments. Some cryptocurrencies are more private than others. 

Bitcoin, for instance, is a relatively poor choice for conducting illegal business online, since the forensic analysis of the Bitcoin blockchain has helped authorities to arrest and prosecute criminals. More privacy-oriented coins do exist, however, such as Dash, Monero, or ZCash, which are far more difficult to trace.

The effect of the cryptocurrency ban by the apex bank in Nigeria is that it will prevent Nigerians from being able to deposit and withdraw from their accounts in crypto exchanges as before. It will also make trading and owning a crypto account more difficult for people.

As suggested by many both online and offline, the only way forward for now in Nigeria is through peer-to-peer transactions. You can still own, transact in crypto without any issue provided financial institutions does not know what you are paying for online. Meaning, while doing your peer-to-peer transactions, you do not need to write the reasons why you are making such payments to the other person via Remarks or any other way.

This piece was put together by Juachi Ochu

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