"There’s no stopping crypto, [it's] the future and we won’t let some old fools take our future from us," one Nigerian bitcoin user who wished to remain anonymous told CoinDesk. "We’re Nigerians. Using the crypto is a way out of poverty for the youth."
Last week, the Central Bank of Nigeria (CBN) ordered banks to close down accounts associated with cryptocurrencies. But this will not be enough to shut down Nigeria's cryptocurrency market.
CBN clarified on Sunday that this is not a new order, but a reminder of a directive published in 2017. However, whether old or new, it's having an impact. In response, banks quickly cut ties with cryptocurrency companies, such as the Binance exchange and social payments app Bundle, which in turn stopped accepting deposits.
Nigeria has become a hot spot for cryptocurrency as an alternative to the naira, a national currency prone to depreciation. Nigerians have found various use cases for decentralized digital currencies, from trading bitcoin to make a living to using it to dodge trade restrictions with China. During protests against police corruption in the country last October the Feminist Coalition was one activist non-profit accepting donations going toward the protests. When the group’s bank accounts were frozen and it couldn't accept funds, it switched to bitcoin donations because the payment method could not be frozen.
Some Nigerian cryptocurrency users aren't happy about the directive and have said they plan to continue using cryptocurrencies by using methods that are harder to detect and stop.
Moving to 'peer-to-peer'
Some users think they can get around them by not using centralized exchanges.
"Bitcoin is peer-to-peer, meaning that it can be transacted without intermediaries. Your bank may be able to shut down your account but no one can shut down your bitcoin wallet. This development, while concerning, will not be the end of bitcoin in Nigeria," said Nigerian Bitcoin Core contributor Tim Akinbo on Twitter.
Exchanges such as Binance have been affected because payment partners that store the naira are no longer willing to deal with them due to the directive, putting an indefinite pause on naira deposits to exchanges.
But there's an alternative: peer-to-peer transactions, where two users connect directly to each other to trade cryptocurrency. In return for bitcoin or other cryptocurrencies, a user might make a bank transfer directly to the other user, or pay that person with cash. Platforms such as Paxful and a Binance’s peer-to-peer platform help connect users to other users so they can coordinate these transactions.
"As we all know, [peer-to-peer] can’t be stopped," one trader in Nigeria, Lucky, told CoinDesk.
Despite CBN's directive, several sources in Nigeria told CoinDesk they plan to continue trading bitcoin via peer-to-peer exchanges, and more aired similar conclusions on social media.
"Most people will return to [peer-to-peer] transactions, some will leverage several alternatives that connect crypto to legacy financial systems, like reloadable Visa or Mastercard. Most will simply use crypto as a choice reserve asset. [...] A lot of activities will also go clandestine, or underground," said developer and cryptocurrency educator Chimezie Chuta.
He added he plans to use "alternative channels" to remain a part of the cryptocurrency community.
Crypto exchange Bundle made a similar comment in a statement to its customers about moving to "alternative channels" to ensure they can still buy and sell cryptocurrency. The email stated the exchange will provide more information about how this will work in the coming days.
CBN did not respond to an inquiry from CoinDesk by press time about whether these alternatives are lawful.
The CBN order for banks to close accounts associated with cryptocurrency is supposed to curb criminal activity and risky investments. In its clarification, it also listed several reasons why it considers cryptocurrencies dangerous and noted that other central banks and international financial institutions have warned against their use.
"They have all made similar pronouncements based of the significant risks that transacting in cryptocurrencies portend – risk of loss of investments, money laundering, terrorism financing, illicit fund flows and criminal activities," the letter reads.
Sources in Nigeria disagree, arguing the regulations are a mistake.
"The fact that the CBN sent out this controversial memo to banks and other financial institutions without giving the industry participants and stakeholders an opportunity of dialogue shows how little they know about the Nigeria blockchain and cryptocurrency ecosystem," Chuta said.
He argued that Nigerians should have a choice over what assets they invest in, especially because the value of the naira depreciates over time and users might want to use bitcoin as a hedge against this continuous inflation. He said many Nigerians are using crypto trading to put themselves through school, thousands of new businesses and jobs are being created by crypto innovation.
"The fact is that this directive was ill-advised, archaic, retrogressive, insensitive, and [smacks] of primitive superstition," he added.
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Some users are waiting to see if CBN issues any more rules or clarifications.
"Decentralized systems are hard to ban. But as for me, I’m waiting for more directives and then I can pick my positions," crypto enthusiast Bayo Adebayo told CoinDesk, adding: "But putting a ban in the first place is very bad. I don’t like Nigeria. If it is to be banned totally, I will find a way to leave this Nigeria."
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