Project Materials

INVESTIGATION OF THE CBN CRYPTOCURRENCY BAN POLICY IN NIGERIA AND PUBLIC PERCEPTION

Chapter one

INTRODUCTION

1.1 Background of the Study

Historically, the general market and most financial markets have seen tremendous growth. In this sense, systems of transferring products have changed and adapted to market needs, with the goal of simplifying business transactions as much as possible. Foreign exchange refers to the assets employed in the exchange of goods. Most economists define money as a medium of exchange, capital, and savings.

We believe money is an exchange tool, but we both accept it. The merchant agrees to accept cash in exchange for the items, and employees accept payment for their work. Money, as part of an account, serves as a simple tool for identifying and transferring value.

Money functions as a savings account, allowing us to save the results of our business with the proper tools. In other words, money enables us to sustain the value of a work week with fewer resources than a long, long week. If not, how will we pay for it later? Since the days of commerce, iron ore and coins, gold and silver, the development of current systems and systems, and the development of globalisation, such as the manufacture of cryptocurrency known as bitcoin and ethereum, have been ongoing for decades.

Each sort of coin plays a significant part in each transaction. However, when society as a whole and the market as a whole expanded, advanced mechanisms of transaction were needed. In this regard, the introduction of cryptocurrencies has altered the worldwide payment system to an inconceivable level a few years ago.

Digital currency is a digital or real currency that uses encryption for protection. As a result of security concerns, cryptocurrencies are difficult to lie about.

The type that distinguishes a coin and is clearly the most appealing is that it is not issued by a central authority, making it susceptible to interference or government fraud. Cryptocurrency offers both advantages and cons.

The main advantage of employing cryptography is that it allows money to be transferred between two parties through compensation; this exchange permits the usage of public and private keys for security purposes.

These transactions are handled at low operational costs, allowing users to avoid hefty fees at most banks by conducting them online. The risk of termination poses a significant threat to the bitcoin payment system.

For example, in the history of Bitcoin, companies have been victims of over 40 frauds, some of which cost more than a million dollars. Despite the hazards, many authorities continue to consider cryptocurrencies since they are projected to produce money, promote change, and be simpler than carbide, and they have lost the control of the central bank and the government. Around 856 cryptocurrencies.

According to Gandal and Halaburda (2016), the competitive cryptocurrency market can be investigated for a variety of intriguing reasons. At the root, it is a new market, with more and more competing firms vying.

It is an excellent laboratory with well-defined and high-quality data on price, time, and market capitalisation. Bitcoin leads a long list of cryptocurrencies, followed by Ethereum and Ripple, each worth billions of dollars.

In acknowledgement of all these enormous benefits of digital currency, the Central Bank of Nigeria (CBN) established a regulation on February 5, 2021, instructing financial institutions not to enter or manage cryptocurrency payments. The circular directed banks to terminate any accounts affiliated with the bitcoin trading site.

However, the CBN maintained that no new limitations were imposed on cryptocurrencies, as all national banks were prohibited from using, holding, selling, and/or selling cryptocurrencies under a circular issued by the CBN on January 12, 2017.

1.2 Statement of the Problem

Following the EndSARs demonstration in Nigeria, the Central Bank of Nigeria made a public announcement about its policy to ban cryptocurrency trading in the country in the early part of February.

The Nigerian crypto world received a stunner when CBN released a circular urging financial institutions to avoid from trading or facilitating payments for cryptocurrency exchanges.

On Friday, February 5, 2021, the CBN delivered a letter to local financial institutions directing them to close any bank accounts involved with bitcoin trading platforms. In reaction to the letter, Binance, a cryptocurrency trading platform, and local electronic payment apps such as Bundle suspended deposits.

It further claims that cryptocurrencies are issued by “unregulated and unlicensed” businesses, and that crypto assets are volatile speculative assets that pose a risk to Nigerian users.

Many young Nigerians who dabble in cryptocurrency are clearly dissatisfied with such a direction, knowing full well the apex bank’s effect on Africa’s rapidly expanding financial sector.

This has prompted many Nigerians to go to social media, tweeting with hashtags such as “No To Crypto Ban,” “Why Restrict Crypto Transx,” “No Way To This Restriction,” “We Need Cryptos,” “In Cryptos We Trust,” and others. Some crypto pundits believe the CBN’s attitude was disheartening to the budding industry.