On December 22, the Central Bank of Nigeria (CBN) notified banks that the previously imposed restrictions on their involvement in cryptocurrency transactions have been lifted. This move is anticipated to escalate the competition between crypto-fiat exchanges and peer-to-peer (P2P) merchants, marking a shift from the dominance held by P2P merchants during the ban.
Originally, the CBN had barred Nigerian banks from facilitating cryptocurrency transactions in a bid to eliminate Bitcoin and other cryptocurrencies' use within Nigeria. Subsequently, the crypto community gravitated toward peer-to-peer transactions or direct payments among themselves to circumvent these restrictions.
To gain insights into the local cryptocurrency ecosystem's response to these recent developments, Nathaniel Luz, the co-founder and chief marketing officer of Flincap, expressed optimism about the ban's removal, noting significant benefits for the industry. Luz viewed this change as a signal of Nigeria's readiness to accommodate and support cryptocurrency businesses, highlighting an opportunity for institutional exchanges to reenter the Nigerian market after being absent during the ban.
Luz emphasized that with the ban lifted, there will likely be heightened competition between crypto-fiat exchanges and P2P merchants in what he describes as the world's largest crypto P2P market. He foresees a scenario of "survival of the fittest" as these entities compete for dominance.
Regarding the requirement for exchanges to register with the Securities and Exchange Commission (SEC), Luz acknowledged the challenge it poses for startups. However, he perceives this regulation as ultimately beneficial for the cryptocurrency industry, drawing parallels to changes in the Nigerian banking sector following the 2010 recapitalization policy. This policy resulted in bank mergers and acquisitions, ultimately contributing to a more robust banking landscape.
In February 2021, the Cointelegraph reported the CBN's directive that prohibited regulated financial institutions from servicing cryptocurrency exchanges. However, the recent notice signifies the CBN's recognition of the increasing global demand for and adoption of cryptocurrencies, leading to the revision of stringent 2021 restrictions on financial institutions.
