2021 Crypto Ban by Nigeria's Central Bank Hinders Adoption of eNaira amidst Fading Trust
Summary:
Chinedu Albert, an expert in Nigerian tech and innovation law, contends that the Central Bank of Nigeria's (CBN) 2021 ban on crypto service support from regulated financial institutions significantly stifled adoption of the eNaira. He argues that the eNaira lacks the shield against government policy and inflation that cryptocurrencies offer, which is a key reason for its low uptake. Amid the backdrop of the Naira's sharp depreciation, a trust deficit in the local currency and the CBN, combined with the increased use of cryptocurrencies, further hinder the adoption of eNaira. Despite the ban on digital assets being lifted, the Central Bank and eNaira face an uphill battle to regain trust and achieve widespread use.
Chinedu Albert, a legal connoisseur in Nigeria's tech and innovation field, states that the Central Bank of Nigeria's (CBN) 2021 ban on regulated financial institutions providing support to cryptocurrency platforms has curtailed the spread of eNaira in the country. Albert shares his views with Cointelegraph, stating that the introduction of a digital currency by the central bank of Nigeria—which displays the government's reaction to its blanket ban on cryptocurrency and other digital assets—is a far-reaching concept yet to be realized. According to a 2021 Chainalysis ranking, Nigeria was scored high on the Global Crypto Adoption Index, indicating a strong appetite for a form of currency not dictated by government regulations or inflation - a characteristic of cryptocurrencies. However, Albert believes that the limited uptake of eNaira is due to its absence of this safeguard, a feature integral to cryptocurrencies. A study conducted by KuCoin in 2022 highlighted that a significant number of Nigerians have started utilizing cryptocurrencies as a safe means of preserving and transferring assets. Local news outlets indicated that the naira, Nigeria's standard currency, depreciated by 23% in the third quarter of 2023, prompting local investors to turn their attention towards deflationary assets like Bitcoin. Albert points out that the citizens' lack of faith in the naira and the governmental body overseeing it makes the adoption of eNaira unlikely unless the government can gain the trust of its people and the naira can earn a more trustworthy status. Released on October 25, 2021, and open for transactions to all, the eNaira is the pioneering Central Bank Digital Currency (CBDC) in Africa. An IMF report from May 2023 recorded roughly 14,000 eNaira transactions per week, constituting only 1.5% of all wallet transaction, suggesting 98.5% of wallets remain dormant weekly, indicating "disappointingly low uptake." Despite the CBN revoking the ban on digital currencies for banks and financial institutions on December 23, the Central Bank and its eNaira must bridge a trust gap. Actions such as the crypto ban, closure of bank accounts linked to crypto, manipulation of foreign exchange, and the recent redesign of the naira have left a sour taste in the mouths of many Nigerians regarding the apex bank's policies.
Published At
12/29/2023 2:04:13 PM
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