War with crypto?

Comments on CBN ban of cryptocurrencies.

CBN banned Crypto!

Ọmọ, Make I no lie, that thing pain me.

I was just about to add the last piece to complete the cryptocurrency puzzle I was playing in my head when the news broke. The whole puzzle scattered immediately.

I was trying to reconcile our local economy and foreign exchange market with the world of cryptocurrencies.

I was beginning to see the various opportunities for Nigeria in this space and to be very sincere, I was very excited, because I could sense that a new industry that will generate wealth for Nigerians was being created, little did I know that “village people”, coming in the form of central bank, was just around the corner, waiting to scatter my plans and thinking and just as I was about to make an headway, they struck! The news of the ban came, sending me back to square one in my reasoning, although now, I am beginning to make headway again, I am almost completing the puzzle, but one question keeps ringing in my head “Why did CBN ban crypto trading”.

Source: btcmanager.com

Although the official communique gave the volatility and the use of cryptocurrencies and blockchain for criminal activity such as money laundering as the reason for the ban, the “Nigeria” in me refused to believe these reasons and that question lingered on in my mind, I didn’t get my answers until few days later when the whole reason for the whole fiasco became so clear.

Few days after the news, we got words that the senate was discussing the ban and in the usual Nigeriaesque fashion, the whole debate became polarized, with southern senators disagreeing with the decision of the CBN governor and the northern senators agreeing with him. That was my Eureka moment! And the answer I have been searching for hit me in the face.

You see, the conversion/exchange of local and foreign currencies (forex markets) in Nigeria for decades  has being under the purview of the CBN, the CBN outsourced this job to the Bearau de change, which in turn created a network of people, majorly northerners that we have come to know as “aboki dollars”. These people whom I call “CBN and gang” are the ones majorly responsible for the conversion/swapping of any currencies taking place on the shores of Nigeria.

The role they play in trade is very important, especially in the import/export sector.  Let’s say I am a car dealer who import cars from different countries, and I need to get some cars in from China. This particular business is going to cost me about ₦50m which I have in my account, but the seller in china won’t collect naira from me, he needs dollars. So, what I do? I’ll take my ₦50m, head to CBN/any BDC, hand them my naira, and they will give me the dollar equivalent of my cash which I can then use to procure my cars. So without CBN and gang, trading outside the shores of Nigeria is virtually impossible as a Nigerian business.

In recent times, CBN began to implement some draconian policies that made it difficult for people/traders to get foreign exchange ($100 limit on debit card was classical example), Imagine trying to import something worth of $10,000 and CBN is only allowing you access to $1,000. When people saw that the central bank was trying to make life and trading hard for them, they begin to look out for someone/something that will save them from the chains and manacles of forex restriction and in cryptocurrencies they found a savior, people suddenly realized that rather than queue at CBN or BDC for dollars that was not forth coming, they could directly convert their naira into any cryptocurrency and send it to anywhere in the world, which meant that instead of taking my ₦50m to CBN, I could buy bitcoin with it, send the bitcoin to Chaio Yeng, my car dealer in China who in turn will convert the bitcoin to his own local currency. Also, the money that was coming into the country, rather that come in through dollars which CBN has total control over, was coming in through crypto(majorly bitcoin), the diaspora sent cryptocurrencies to their folks in Nigeria, the cryptocurrency  upon reaching a Nigerian wallet can be converted to naira, totally eliminating CBN and their middlemen gang from the picture. In 2020, foreign remittance through CBN dropped from whooping $2.5bn to a meagerly sum of $200m.

CBN and gang, seeing control over foreign exchange slipping away from their hand, knew they needed to act fast before they lost everything, it was just a matter of time before they came for the suspects responsible for the current turns of events, of which crypto was top of the list. And on the 12th of feb, 2021, CBN dropped the bomb, crypto trading with Nigeria banks has been banned.

When this answer hit me, I just chuckled and smiled, because I know CBN is fighting a war that it is going to lose badly, you don’t stand in the way of disruptive innovation, and not be badly crushed!  I don’t think those at the CBN read history because if they did, they will have heard of a group of people called “Luddites”.

Around 1810, weaving machine and textile factories had started to emerge and they were replacing humans who were skilled and deft at using their hands to weave, these machines obviously were faster and more skill than humans in making complex patterns on cloths, so naturally, the machines began to do most of the weaving job, leaving next to nothing for their human counterpart. Seeing all their source of income being taken by this newcomer, the weavers who took on the name of a weaver called Ned Ludd(Luddites) started destroying all the weaving machines they could find around rather than adjust themselves to the new technology, In spite of their actions, the old times of hand weaving were never coming back, weaving machines/textiles factories now rule the day and before you knew it, the luddites were all out of work; poor and wretched, some of them were even executed or sent to prison because of sabotage to the nascent textile industry, and just few years after their antimachine movement has begun, the Luddites movement came to abrupt end.

Their name is now synonymous to anything/anybody that opposes any new technology. I sincerely hope that CBN and it gang will take a lesson from history, have a rethink of their decisions/actions and rather than fight the emergence of cryptocurrencies as means of trading and payment, they should adjust to it, because if they do not, just like the luddites were, CBN and gang will soon find themselves out of job, poor and probably on the way to their final burial place in the world of finance because the days of cryptocurrencies and blockchain are here.