Crypto Enthusiasts Warn Against Naira Trade Ban

Some supporters of cryptocurrency in Nigeria believe that the country’s decision to stop naira trading on crypto exchanges may lead to further deterioration of the already unstable national currency. Rume Ophi, the executive secretary of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN), shared his views in an interview, highlighting that the official stance blaming global cryptocurrency platforms for the naira’s depreciation is not practical. Ophi argued that Nigeria could manage the crypto industry effectively through a regulatory framework introduced by the Nigerian Securities and Exchange Commission (SEC) in 2022.

The naira has seen a rapid decline, contributing to an inflation rate that hit a nearly three-decade high of 29.9%. This economic pressure has prompted the Nigerian government to concentrate on platforms offering cryptocurrency services. These services have become popular for facilitating trades and giving an informal value to the naira. Critics argue that these platforms are not the root cause of the currency’s challenges.

In a recently published opinion piece, Iwa Salami, an associate professor at the University of East London, contended that cryptocurrency has been wrongfully blamed for devaluing national currencies. She proposed that Nigerian authorities should adopt a balanced approach to regulation rather than implementing an outright ban. According to Salami, while cryptocurrency activities have been linked with money laundering and the drug trade, there has been no direct evidence connecting them to currency devaluation.

Salami stated that a well-regulated financial system could allocate resources efficiently and manage risks effectively. She believes that a balanced regulatory approach is essential for the crypto industry to thrive without endangering financial and monetary stability. Such regulations should aim to protect both consumers and investors.

Previously, news reports detailed Nigeria’s intense scrutiny of cryptocurrency trading platforms, holding them accountable for the naira’s rapid decline earlier in 2024. One of the major platforms under investigation was Binance, facing multiple charges, including tax evasion.

Salami stressed that Nigerian authorities could achieve their objectives through regulation rather than prohibition. By utilizing the regulatory framework established by the Nigerian SEC in 2022, the authorities could compel cryptocurrency exchanges to disclose identities of wallet holders involved in suspicious activities. This approach would bridge the gap between necessary oversight and fostering innovation.

The associate professor also suggested that global adoption of international standards for crypto assets, such as the recommendations from the Financial Stability Board, could offer a comprehensive solution to the concerns raised by the Nigerian authorities and other global regulators. Such standards could ensure clarity and consistency in the regulation of crypto asset activities worldwide.

This push for regulation over outright bans reflects a nuanced understanding of the complexities surrounding cryptocurrency and its impact on traditional financial systems. While challenges remain, a balanced regulatory approach may help mitigate risks while fostering an environment where innovation can still flourish.

Ophi and Salami’s perspectives point towards a need for informed regulatory measures that do not stifle technological advancement. The balance between regulation and innovation could pave the way for a more stable financial environment in Nigeria, potentially serving as a model for other nations grappling with similar issues.