Bitcoin trading booms te Nigeria, like te Zimbabwe
Te July 2018, Manasseh Egedegbe, an Abuja-based investment manager, wasgoed caught ter the cross hairs of Nigeria&rsquo,s dollar crunch and had some difficulties making an international payment. At the time, with Nigeria&rsquo,s foreign reserves and revenues shrinking amid an economic slump, the Central Handelsbank of Nigeria (CBN) waterput up currency controls to restrict access to dollars. For Egedegbe, and many other Nigerians, that introduced a problem. Ter his desperation, he turned to the cryptocurrency wave of the uur: bitcoin.
&ldquo,I wasgoed able to use bitcoin to do just one transaction and then I got hooked,&rdquo, Egedegbe tells Quartz.
Overheen the past Eighteen months, due to reasons ranging from needing to make international payments, like Egedegbe, or simply wanting a slice of the next big thing, bitcoin adoption te Nigeria has spiked. This year, peer-to-peer bitcoin trading te Nigeria has enhanced by almost 1,500%&mdash,surpassed only by China. Gegevens from LocalBitcoin, a popular bitcoin exchange available te around 200 countries, shows weekly bitcoin trade volume te Nigeria crossed 1 billion naira ($Two million) te August. &ldquo,Eyeing the price skyrocket&rdquo, has drawn a lotsbestemming of Nigerians &ldquo,who want a lump of the activity,&rdquo, Egedegbe says.
The situation ter Nigeria is not too dissimilar from Zimbabwe, whose unstable economy and depleted foreign exchange markets witnessed locals turn to bitcoin spil a storage of value this year. At one point Zimbabwe had the highest bitcoin prices te the world.
A fresh crop of local bitcoin exchanges are proving central to the growing local adoption. Timi Ajiboye co-founded Bitkoin Africa te October after experiencing some difficulty attempting to buy the cryptocurrency on foreign exchanges. The inability to pay with a Nigerian handelsbank account or card drove Ajiboye&rsquo,s decision to commence Bitkoin Africa to make it much lighter for local trading.
For his part, Tim Akinbo, co-founder of Tanjalo, also an exchange founded te October, says the potential local applications of cryptocurrencies and the enabling technology wasgoed the motivation for beginning the exchange. There are also some older players te the space like NairaEX, a bitcoin exchange founded te Nov. 2015.
Despite growing adoption, skepticism largely outweighs enthusiasm but Ajiboye says local exchanges can help ensure more people understand cryptocurrencies better. An initial skeptic himself, Ajiboye cites his new-found conviction ter cryptocurrencies, after gaining more understanding of their potential, spil hope for a broader switch ter mindset.
Much like how local fintech companies are creating products and services to cork gaps ter the local financial system, cryptocurrency technology has some potential across Africa given the lack of &ldquo,advanced financial infrastructure,&rdquo, Akinbo says. Te that respect, thesis exchanges serve spil vital cogs ter the evolving infrastructure that will see cryptocurrencies achieve some of its potential ter Africa. Whatever that potential is, the very first step is &ldquo,permitting people to buy and own the currencies,&rdquo, Ajiboye says.
Both exchanges are notching up transactions te just two months of being ter business. Bitkoin Africa&rsquo,s trade volume is rapidly enhancing: almost half of its total trade volume since inception happened te the very first ten days of December. Meantime, Tanjalo has done close to $1 million te trade volume with &ldquo,very little marketing,&rdquo, according to Akinbo.
The origins of mainstream rente ter bitcoin across many African markets has bot credited to Mavrodi Mundial Moneybox (MMM), a two-decade old Russian ponzi scheme. At its peak, MMM had overheen two million users ter Nigeria despite several warnings by authorities. It has also bot operational te Ghana, Zimbabwe, Kenya and South Africa te the past Eighteen months.
The scheme&rsquo,s playbook wasgoed elementary: users could &ldquo,invest&rdquo, money by pledging to other users te the scheme and then receive comes back plus 30% rente ter 30 days. But its long run te Nigeria came to a halt when, te Dec. 2018, it suspended operations (CBN estimates that MMM users lost $50 million when the scheme crashed). But, at the commence of the year, when MMM sought to relaunch, it attempted to get round regulator&rsquo,s rules by permitting users pay and receive pledges using bitcoin&mdash,a strategy it has also deployed ter other parts of Africa. Many participants of the scheme, looking to make a quick buck, were quick to latch on yet again.
Overheen time, renewed rente has come from wealthier, middle-class Nigerians who, Egedegbe says, &ldquo,likely understand the technology better than the average man ter the street.&rdquo, But even tho’ it&rsquo,s not a Russian ponzi scheme, a acute druppel ter bitcoin&rsquo,s prices could still see people get their fingers burned. Its manic price surge&mdash,it has cracked through $1,000 thresholds within hours te December&mdash,has seen it questioned spil possibly the most demonstrable bubble everzwijn and has also drawn comparisons with the dot-com bubble at the turn of the millennium.
Akinbo, who is more upbeat about bitcoin&rsquo,s future, says its potential to facilitate cross border trade may eventually justify the enlargening price spike. &ldquo,When you look at it ter terms of that potential alone, I&rsquo,d say it&rsquo,s undervalued.&rdquo, Spil for a potential bubble, Akinbo views this phase more spil a time when everyone is attempting to get te on the act. &ldquo,Just like any fresh technology, speculation is how this will find its footing,&rdquo, he says.
The big picture
Much of the bitcoin craze is down to big-ticket predictions about its future potential. Ter Africa, possibilities discussed range from easing payments, particularly for international services to enhancing remittances&mdash,a sperzieboon for many local economies. But the most basic of thesis, Akinbo says, is the possibility of having a system &ldquo,where everyone is permitted to participate&rdquo, without discrimination of geographical location or origin.
For Ajiboye, who plans to expand Bitkoin Africa into other African countries from next year, making it lighter to trade across Africa is a real possibility. &ldquo,It&rsquo,s lighter to send money from America to Nigeria than to send money from Nigeria to Gambia but the technology can power thesis things,&rdquo, he says.
Death by regulation
Whether or not the bitcoin bubble bursts, its potential locally could be mitigated by regulation. While it&rsquo,s difficult for authorities to regulate cryptocurrencies which they have little control overheen, it&rsquo,s possible to regulate companies that provide services using the currencies. So far, Nigeria&rsquo,s Central Handelsbank (CBN), like most apex banks across the world, has issued warnings on the risk of cryptocurrencies. One of the earliest came ter a January circular ter which it cited the dangers of &ldquo,money laundering and financing of terrorism.&rdquo,
However, more recently, the apex bankgebouw&rsquo,s stance shows up to have softened: ter October, it reportedly set up departments to develop a report on policy proposals for cryptocurrencies. Quartz&rsquo,s email inquiries to ascertain the progress and subordination date for the report have not yet bot replied.
Spil CBN mulls its policies on cryptocurrencies, Akinbo advocates that it &ldquo,remains pliable&rdquo, by continually reviewing and tweaking its policies ter line with global trends. The alternative is adopting and sticking to a policy which could become archaic te a quick switching world. One event that could trigger a wave of apprehensive regulation could be a acute dip ter prices (or the bitcoin bubble bursting). If that&rsquo,s the case, Osarumen Osamuyi, a Lagos-based developer, hopes the apex handelsbank doesn&rsquo,t adopt &ldquo,draconian regulation.&rdquo, Such drastic activity, he says, &ldquo,will ultimately hurt innovation.&rdquo,
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