Binance, Buycoins Africa, Quidax, Bundle bows to CBN’s crypto ban

The CEO of the world’s largest crypto exchange, Changpeng Zhao recently disclosed that Binance was  without hesitation complying with Nigeria’s Apex bank directive and has disabled/suspended deposits to prevent more NGN from coming in the binance deposit system

The highly revered crypto leader updated its clientele base by notifying them via Twitter it received notice from channel partners that NGN deposits and withdrawals will be affected.

What this implies: Changpeng Zhao anticipates that the Nigerian banks will stop working with Crypto exchanges in line with the Nigerian Apex bank directive, meaning  P2P trading will likely flourish as a result.

• He further advised Nigerian customers to withdraw their local denominated deposits as early as possible to avoid potential channel issues.

That said, many Crypto pundits are of the opinion that although the Central Bank’s recent directive does not criminalize ownership of crypto. The circular will however make it difficult for them to process debit, credit card, and bank transfer transactions taking into consideration most fintech startups usually partner with Deposit Money Banks, Non-Financial Institutions, other financial institutions like Paystack, Flutterwave, Korapay to transact with Nigerian bank customers.

Furthermore, Nigeria’s fast-growing crypto exchange, Quidax  issued a press release on the CBN’s new instructions regarding crypto payments,

“We have seen CBN’s new policy but don’t worry your funds are safe and trading continues as usual. However, all Naira deposits have been temporarily paused as CBN’s policy affects our payment partners.
Thank you for your support,” Quidax stated.

Additionally, a Nigerian-based crypto exchange, Buycoins Africa has reiterated and assured all clients via its Twitter handle, disclosing their funds were in good hands thus further assuring the public that the fintech company would ensure its services were compliant.

“Thanks to everyone who has reached out. We are fully aware of the newest CBN circular and are going to be working with regulators to ensure our services are compliant. All trading on our platforms continues as usual, and all user funds are safe,” BuyCoins tweeted.

Furthermore, Bundle, a social payments app that offers crypto support, also disclosed that it was fully aware of the newly issued CBN directive and stated that customers’ funds remained safe as usual.

Here is an excerpt of Bundle Africa’s statement as regards the Nigerian apex bank’s directive recently issued;

“We’re aware of the notice on cryptocurrency-related Naira payments shared by the CBN today.

“Trading has not stopped and your assets remain as safe as ever. We are monitoring the situation closely and we’ll share updates as we have them. Thank you for your support!.”

In case you missed it

Recall, the Central Bank of Nigeria had recently notified Deposit Money Banks, Non-Financial Institutions, other financial institutions against doing business in Crypto and other digital assets.

In a circular dated 5th February 2021 and distributed to regulated financial firms, the apex bank of Africa’s largest economy warned and reminded local financial institutions against having any transactions in crypto or facilitating payments for crypto exchanges.

• The apex bank instructed the financial institutions to immediately close the accounts of such persons or entities transacting in or operating cryptocurrency exchanges.
• Also, the CBN further warned Nigerian financial stakeholders that any breach of this directive will attract serious regulatory sanctions.

What is the impact of the crypto ban on Nigerians?

Although it remains to be seen whether the ban on crypto transactions will be enforced, there is palpable tension in the air. If implemented it will prevent Nigerians from being able to fund and withdraw from their accounts in crypto exchanges.

While it does not criminalise ownership of crypto, the new circular makes owning and trading it more difficult for everyday people. In a time when many countries are exploring ways to make cryptocurrencies mainstream, Nigeria’s central bank has effectively taken the country back by more than a few steps.

What is the way forward for cryptocurrencies in Nigeria?

It is important to note that the CBN’s notice is not a direct ban on cryptocurrency. The country’s apex financial body does not have the power to ban or criminalise crypto any more than it can criminalise the dollar, euro, or cedi. Rather, what it seeks to do is ensure that organisations regulated by the CBN no longer  facilitate or participate in cryptocurrency transactions.

The way forward for cryptocurrency in Nigeria appears to be Peer-o-peer (P2P) transactions for now. Since ownership is not criminalised, everyday Nigerians can still own crypto and trade it among themselves without any hitches – provided financial institutions do not know what they are paying for.

The P2P market has always existed and is a bigger fraction of the crypto market than centralised exchanges and other crypto companies. The decentralised nature of crypto ownership and trading means people can still buy and sell among themselves.

According to an industry source, the only way the CBN could have achieved some kind of regulation was through centralised exchanges — which it has not cut off. While that is looking increasingly unlikely, it is an option that might still be explored. After all, the Nigerian government have been known to hit with highhanded sanctions and later soft pedal after meeting with stakeholders.

The re-emergence of P2P transactions means there will be more cases of fraud in crypto. Crypto startups will likely pivot to fill this need by providing P2P platforms where verified users can sell to one another.

A likely scenario is one where User A holds their cryptocurrency in an escrow with the exchange while User B transfers a sum of money equivalent to the crypto being purchased to the bank account of User A. On receipt of the naira equivalent, User A confirms the transaction and the crypto is released to User B.

P2P platforms like this are already popular all over the world with companies like Paxful and Remitano leading the way. In Nigeria, Buycoins also has a P2P offering.

Conclusion

All is not finished for Nigerian crypto startups. For many of them, this was a day they had anticipated and planned for. Although there are options to be explored, none of them are easy. However, if there’s anything you quickly learn as a Nigerian founder, it is that there are no easy ways to build.

Regulations are a necessary counterpoint for the eager arms of innovation. In this case, crypto startups are having to fight to make sure the arm is not cut off entirely.

Early communications from crypto startups have sued for calm with customers. The companies have also indicated that they are in communications with regulators to see how the issue can be resolved.

It goes without saying that the crypto industry has taken a few step backs via this announcement. It will be a long road to recovery and full acceptance by the government. However, these companies have shown time and time again that they are willing to create solutions out of little. All bets are on the crypto companies to make it work eventually.