Last Updated on February 1, 2021 by Ope Quadri
The adoption of bitcoin and other digital currencies by some Nigerian Foreign exchange operators, domain registrars and web hosting firms is gaining momentum even years after it has been adopted in some major countries like South Korea, Japan, United States etc.
Bitcoin is the most valued cryptocurrency in the world, and considering the value of Nigerian currency at the moment a bitcoin is worth over four million naira, which has made its promotions rampant on electronic and social media.
Early this year, an online friend who just launched a bitcoin blog said bitcoin education is still very low among Nigerians; he wasn’t impressed by the answers he got from some Nigerians he’s trying to sell the idea of bitcoin to.
Bitcoin is mostly known among bankers; popular among those who were already in FX, bloggers and those who follow the international trading.
Since its adoption continues to grow every day, Nigerian Stock Exchange Commission (SEC) recently issued strongly warnings to potential investors to “exercise extreme caution” following sale pitches and mouth-watery offers that have been made for some of the operators in recent times. SEC said in a January 12, 2017 statement that:
The public is hereby advised to exercise extreme caution with regard to digital (crypto currencies such as Swisscoin, OneCoin, Bitcoin and such other virtual or digital currencies) as a vehicle of investments.
This warning is in consonance with similar warnings issued by capital market regulators and Central Banks across the world over the past few years.
The Commission, wishes to alert the public that none of the persons, companies or entities promoting cryptocurrencies has been recognized or authorized by it or by other regulatory agencies in Nigeria to receive deposits from the public or to provide any investment or other financial services in or from Nigeria.
Why is Nigerian authority worried over Bitcoin and other digital currencies in Nigeria?
- MMM case
- Money laundering concern
- Bitcoin mode of operation in Nigeria
- Cryptocurrency based fraud
When the notorious ponzi scheme, MMM, found its way into Nigeria, SEC issued numerous warnings to Nigerians who rushed to the scheme before its eventual crash and re-launch, which led to lost of several millions of naira in the process.
The aftermath of its crash were several suicides and attempted suicide by its investors. Surprisingly, the controversial Ponzi scheme later announced that it would introduce bitcoin as a form of payment.
Bitcoin isn’t a ponzi scheme, but its mode operation whereby coins are mined and traded online; and operators in Nigeria haven’t been licensed makes it vulnerable to attack, hack, and other fraudulent activities.
Money laundering concern
There have also been worries over the possibility of politicians, government contractors, senior governor government official, and public officials using digital currency to launder money.
Bitcoin mode of operation in Nigeria
Licenses are issued to operators of cryptocurrency exchanges in countries where its adoption has gone beyond imagination.
For instance, Japan’s Financial Services Agency (FSA) closely monitors cryptocurrency exchanges. Japan had even taken a step ahead by passing law setting standards for exchanges.
In contrast, Nigeria has more Bitcoin exchange operators on messaging app WhatsApp, and on blog without government approval.
Cryptocurrency based fraud
SEC is also believed to be monitoring bitcoin news globally. For instance, Japan despite government regulatory rules aren’t strange to cryptocurrency-based fraud, with 33 cases, representing more than a half of million dollars-worth of loses, reported in the first seven months of 2017.
One of such is Mt Gox which collapsed, resulting in the loss of millions of dollars in customers’ funds.
Bitcoin and other digital currencies, because of global value, has become target of hackers. South Korea was recently accused of targeting its neighbour South Korea. We believe that Nigerians bitcoin investors may also be targets.
With its current trend, it may be difficult for SEC to appropriately regulate bitcoin operation in Nigeria unless it learns from South Korea, Japan who have been into the game for years ago.