A 54-page document released last month by Nigeria's Securities and Exchange Commission (SEC) outlined new regulations regarding issuance, platforms, and custody of digital assets. In a country suffering from the economic repercussions of the pandemic, the move by the SEC will legitimize cryptocurrency in Nigeria. Already 33 million people invest in cryptocurrencies in Nigeria.
In light of the Central Bank of Nigeria's (CBN's) alleged outlawing of the technology entirely in 2021, the recent action taken by the Nigerian SEC was unexpected. With this move, the state legitimizes a technology that can serve to eliminate barriers to financial inclusion in a country where 36 percent of adults are financially excluded and often do not have bank accounts.
Because of the high inflation in Nigeria (currently 16 percent), it should come as no surprise that millions of Nigerians are turning to crypto to meet their daily needs. Blockchain technology is often used to hedge against inflation, but many have simply taken advantage of it for everyday payments, sending money abroad (and receiving it instantly), and for investments.
Continuing problems with the e-Naira, Nigeria's central bank's digital currency, have not improved long standing problems in the country, such as financial market access, which has led many to turn to crypto. The country is the second-largest cryptocurrency player in the world, behind only the United States, according to Bloomberg. Nigeria's appetite for crypto is as strong as ever, given the fact that the technology was essentially outlawed in the country.
As a result, the CBN's continued approach to crypto is outdated and unwanted by millions of Americans seeking economic empowerment and social advancement. Africa is the world's most youthful continent with over 60 percent of its population under 25 years of age, so it is imperative that we help its tech-savvy, and youthful, populations as much as we can, if we want them to reach their full potential and modernize the continent.
As part of the SEC's new framework, a number of features are designed to mitigate cryptocurrency-related risks. Businesses offering crypto products or services to Nigerians now need a virtual asset service provider (VASP) license, in addition to the relevant category licenses. To ensure maximum transparency, the SEC will now keep records of all crypto exchanges providing services to Nigerians.
In a country that has lagged behind others in the world at times, this is a positive step towards embracing crypto and blockchain technology. Taking such steps at the state level will enable the Fintech sector to grow and empower young entrepreneurs even further.
Several studies report that crypto technology stimulates innovation and that banning it would jeopardize financing for industries such as micro, small, and medium-sized businesses.
By continuing to impose restrictive policies, foreign direct investment (FDI) into supposed tech hubs in Africa, such as Lagos, could be hindered. A new Silicon Valley without silicon would result.
Blockchain technology represents a way to democratize blockchain technology throughout Africa via mobile phones, which will enable instantaneous, secure, and direct payments through the blockchain. To be successful, smallholder farmers need technologies, such as blockchain, to gain access to markets and information.
Combined with the growing number of smartphones and mobile phones rolled out across Africa, blockchain has been growing for some time. Hence, the SEC could be the key to Africa's economic recovery after the pandemic.
According to a report published in April by the African Development Bank (AFDB), young people are increasingly frustrated by arbitrary government policies. As with other restrictive policies and challenges that these people have faced, they have often been able to work around them, but this recent move by the SEC is a positive step in providing assistance for those seeking more empowerment.
To achieve a modernized economic climate in Nigeria, the CBN should now collaborate with the SEC. This will prevent millions of people from fearing unjust repercussions from using the technology.
Like many other technological advances of our time, cryptocurrency is here to stay, and we must embrace it, and not fight against it. Crypto is a great way to promote Africa's economic revolution by removing barriers to finance across the continent.