According to a 2018 publication by Bloomberg, Nigeria is currently ranked the most likely nation in the whole of Africa to adopt cryptocurrencies. In addition to the fact that the country is a hot bet for cryptocurrency, it ranks first on Google trends in bitcoin-related searches. Despite this, the country has refused to adopt the digital currency as a result of the continuous warnings from its Central Bank against cryptocurrency’s volatile nature.
For many, the adoption of cryptocurrency is the ultimate revolution that would put an end to the government and banks while for others it is just another financial puzzle which makes it easier for criminals to hide away their money from the police.
Cryptocurrencies are built on a decentralized payment system, which lets people send currency to each other, over the web without the need for a trusted third party such as a bank or any other financial institution. It is an alternative currency that uses decentralized control as opposed to centralized digital currency and central banking systems. There are over a thousand different types of cryptocurrencies in which Bitcoin, Ripple, Litecoin, Ethereum, Zcash, Monero and Dash top the list as the most important.
Many Nigerians have been very quick to brand cryptocurrency as a crime-aiding mechanism and yet, we do not realize that there are advantages to blockchain. The transactions on cryptocurrency are cheap and in some cases, free. Another upside of cryptocurrency is that it uses public-key cryptography, a high grade military technology in which whoever must make a change to the blockchain must have the important credentials. The parties to the transaction need to have a pass phrase or a private key which enhances privacy.
A notable downside however is that the centralized digital currency system stores data in a single record which makes the security of transactions to be debilitated. This is as opposed to the decentralized blockchain system where data is stored in a chain of blocks and as a result, where a block is hacked and its contents are changed, it becomes different from several other blocks.
The major reason Nigeria has been described as a hot bet for cryptocurrency is that smart phone penetration is increasing and 94% of the country’s population own at least one smart phone and there is an estimate of 150 million active subscriber lines in the country. In addition, over 94 million people use the internet in the country as estimated in 2016. In recent years, Nigeria has had some downturn and this blockchain system could be a means to revive the country’s economy. The country needs to appreciate and recognize cryptocurrency as a means of exchange.
However, the country has been putting into consideration a number of factors that could harm its economy including volatility. From the regulatory and operative perspective, there are a number of countries including Japan, Singapore, Switzerland, and Netherlands that could serve as case studies for Nigeria in the process of adopting and regulating cryptocurrencies.
The Marshall Islands, a sovereign state in free association with the U.S is an example of a developing nation like Nigeria that she should emulate. The very small nation has adopted its own digital currency called, “sovereign” in February to raise funds and support its economy. Although the International Monetary Fund (IMF) is of the opinion that the potential benefits of the digital currency are much smaller than its potential costs of economic and reputational risks in the small country, the country has responded by saying that the effects of its digital currency will be different because it will be recognized in law as a legal tender, effectively backed up by the government and the funds generated from this initiative will be used for nation building.
Although many people have the opinion that cryptocurrency enhances criminal activities, the very many promising advantages to this new decentralized digital currency outweigh.
By Precious Adeleke, Content Writer at DigiLaw