Cryptocurrencies have brought about a second gold rush. Even though cryptocurrencies have seen a downturn in recent weeks, the digital currency hype has remained unfazed. With new coin offerings coming up now and again, more people seem to be jumping on the crypto wagon.
Cryptocurrencies are free of the relationships that traditional currencies have to their countries; they are traded on online exchanges and can be transferred anywhere in the world. Cryptocurrencies have a limit to the amount that can be created to avoid the inflation that happens when central banks print money.
While Cryptocurrencies have created split public opinions, their adoption rate is a large determinant of their success or failure as a currency and currently the thrill of cryptos as an investment is subtly choking its potential as a currency.
At 81%, Nigeria is the second ranked leader in the world when it comes to mobile share of web traffic. It is estimated that by 2020, 50% of the Nigerian population will be under the age of 25. This percentage, with their high inclination for technology and cutting-edge customer service, represents the next wave of investors.
The economic slump in Nigeria in 2016 intensified the adoption of cryptocurrencies since there was restricted access to dollars for transactions. The early adopters of bitcoin in Nigeria used it as a payment option, but today the majority of crypto holders in Nigeria are in the business of trading it.The coming age of digital currencies is already turning Nigerian millennials into investors and speculators.
Nigeria sits among the top countries where there is a high volume of peer to peer transactions of digital currencies, seeing a 1500 percent rise as at December of last year.
Payments have been an evasive issue in Nigeria and Africa as a whole. The prospects that cryptos offer African economies such as Nigeria, range from easing payments for international transactions to augmenting remittances. One of the most important possibilities of cryptos is inclusion, where everyone is permitted to participate without discrimination of geographical location or origin.
The financial services landscape in Nigeria is being stirred by FinTech, a convergence of financial services and technology. Players in FinTech range from startups to technology companies and even financial service providers. Incumbents of the financial service industry are at risk of losing a sizeable share of the market to FinTech. Although there is a love-hate relationships between banks and Fintechs, they seem to have enabled a symbiotic environment.
Bitkoin Africa is an African platform for trading cryptocurrencies such as bitcoins, ethereum and lite coin. Prices on the platform are set individually by sellers and buyers. The financial technology company facilitates secure, fast trades.
A majority of the Investment that has come to Nigeria has been poured into the Fintech space. KPMG affirms that investment in Nigerian FinTech over the last two years exceeded the $200 million mark.
The Central Bank of Nigeria has confirmed that it won’t hinder the use of digital currencies. The challenges that cryptocurrencies pose cannot be overlooked, from being a balm for criminal activities such as money laundering, terrorism and drug dealing due to the anonymity cryptos offer to their owners.
Facebook recently announced that it will be prohibiting cryptocurrency advertising on its platform. Google also announced similar plans to take off such adverts by June of this year. These policies are coming into effect due to ads for cryptocurrency investment opportunities being fraudulent. The Crypto-scape is now riddled with scams; fake digital currencies are used to attract unsuspecting customers with the false promise of making them rich. Since cryptos are currently not regulated in Nigeria, the perpetration of fraudulent activities will likely succeed and remain unabated.
It is obvious that for digital currencies to be successful, they have to be regulated. Some governments around the world have taken steps to put a framework for regulating cryptos in place. The UK has instituted a framework to make it easy and quick for innovative startups to comply with the appropriate consumer protection regulations and safely enter the market. Similarly, the New York Department of Financial Services created a regulatory framework called Bit License, to regulate digital currency businesses operating in the States.
Bitcoin is not a recognized currency in Nigeria. However, it can be classified as a good or product. Cryptos can also bring about revenue generation for the Nigerian Government, by making it taxable under the Capital Gains Act.
Regulation may be needed to protect consumers and the wider financial system. In essence, bitcoin and other cryptocurrencies should not remain in a legal void. Adequate supervision has to be implemented by the CBN and other potential regulatory agencies to ensure transparency. It is important the government puts out a framework for individuals and companies participating in the trading of digital currencies. An amendment of the money laundering Act to allow for the recognition of cryptocurrencies will strengthen its stance..
Digital currencies have the potential to turn the Nigerian financial systems on its head. It can reduce the reliance on third-party financial institutions due to its prospect as a system based on trust/proof. The anonymity and transactional speed it affords will continue to scale its adoption.
Transaction costs of cryptocurrencies are lower than in the traditional banking space. Making them a preference for international transactions instead of the expensive services traditional banks offer.
The volatility of cryptocurrencies has not made it a store or measure of value, The demand for cryptocurrencies, tied with the acceptance, drives the value of each crypto at a given time.
The inflation control characteristic of cryptocurrencies is one of its biggest virtues. This is a good thing because with countries looking to adopt industry backed cryptocurrencies, digital currencies are going to be here for a long time.