Cryptocurrency adoption is on the rise in Nigeria. More people are now making transactions, investing and transferring funds with it. In May, Arcade Research ranked Nigeria fifth globally, with about 11% of its internet subscribers owning or using cryptocurrencies.
However, the Nigerian government still hasn’t recognised cryptocurrencies as a valid form of money despite its huge growth. South Africa, a fellow African country which has experienced similar growth in crypto use has however taken steps to regulate the digital currency.
Its Minister of Finance, Tito Mboweni has proposed amendments to its Financial Intelligence Centre Act (FICA) which contains rules around crypto-asset service providers (CASPs), including further responsibilities around which information they have to maintain and conducting due diligence on customers.
“The list of CASPs is extremely wide and will cover the majority of CASP businesses in South Africa, including services providers operating outside the country. The effect will be that all these businesses will be regarded as ‘accountable institutions’ and will be required to comply with the various regulatory requirements and obligations imposed on accountable institutions by FICA”.Seshree Govender, a senior associate at law firm Webber Wentzel.
Growing Need for regulation
As the use of cryptocurrency booms across Nigeria and Africa in general, the number of crypto scammers is also increasing. A report by crypto watchdog, Whale Alert revealed that scammers stole $24 million worth of Bitcoin from victims in the first six months of 2020 alone.
Cryptocurrency is a digital currency based on an innovative technology called the blockchain.
The rapid increase in crypto scammers is due to the low risk of getting caught. Cryptocurrency transactions are basically untrackable and even in a situation when you identify the criminal, the law of the country may not recognise Bitcoin as a legal tended so it will probably be unprosecutable.
As the world accelerated towards more digital forms of legal tender, the Central Bank’s ban on the use of Bitcoin and other cryptocurrencies for transaction purpose is mostly redundant now as it didn’t stop a huge population of people from using it anyway.
In 2019, Google Trends listed Lagos, Nigeria as the number one city based on online search volumes for Bitcoin worldwide.
With the current rate of crypto-inclusion in the country its high time the government follows the South African example and effectively regulate the crypto market to protect Nigerians from crypto scammers.
Cryptocurrency in Nigeria
Last year, the Nigerian Securities and Exchange Commission set up a committee to create a framework for the regulation of digital assets and local crypto exchanges in Nigeria.
However, no visible resolution has been made since the committee was inaugurated. Looking at the direction of South Africa’s regulation, Nigeria needs to look into creating requirements for organisations wishing to become crypto exchangers.
Coinmarketcap ranked Nigeria among the top 9 in crypto growth in the world.
South Africa’s regulation makes it compulsory for crypto operators to register as ‘accountable institutions’ with the regulatory body (Financial Intelligence Centre, FIC). It also requires operators to conduct due diligence/KYC on all customers in accordance with a risk-based approach. Lastly, it requires them to develop, implement and maintain a risk management and compliance programme (RMCP).
Also, they have to abide by all of the FIC’s legislative requirements which include conducting customer identification and verification, monitoring for suspicious and unusual activity on an ongoing basis, reporting suspicious and unusual transactions among others.
Apart from the rules the South African government also plans to release a list of CASPs that are authorised to perform crypto operations like exchanging a crypto asset for fiat currency or vice versa, Exchanging one form of crypto asset for another among others
The new laws, if adopted effectively, could shut out fraudulent crypto exchangers who collect money without sending bitcoin. It also helps the government keep an eye on the crypto sector that is currently without significant data.
In summary, trends show that Nigerians are increasingly adopting digital currencies. With the recurring naira devaluations and the high transfer rate of transferring money abroad, cryptocurrency adoption is poised to continue booming. The evident growth surely calls for the government to look towards regulating the sector.