Recent reports indicate that the Central Bank of Nigeria has forced banks to close accounts of customers involved in crypto trading.
What Do We Know?
The news was broken by the People’s Gazette, a Nigerian news outlet, on November 7th, and quoted a November 3rd circular sent to Nigerian banks. The ‘Post-No-Debit’ order, reportedly signed by CBN Director of Banking Supervision J. Y. Mammanand, required banks to close the crypto trading accounts of at least two individuals and one company, with the appropriated funds to be placed in ‘suspense accounts’. This follows a February circular from the CBN requiring banks and other financial organisations to “identify persons and/or entities transacting in or operating cryptocurrency exchanges within their systems and ensure that such accounts are closed immediately.” The justification given for this by the CBN at the time was that crypto was widely used in illegitimate activities such as money laundering and terrorist financing.
Could Political Motivations be Behind the Move?
It has been suggested that the government’s real motivation lies in controlling Nigeria’s youth in the wake of widespread protests across the country in October 2020 against a notorious Nigerian police unit known as the Special Anti-Robbery Squad (SARS). The so-called ‘End SARS’ movement, as well as seeing mass demonstrations, was also a huge social media phenomenon dominated by young Nigerians. When the government moved to block the bank accounts of organisers, they set up a Bitcoin wallet which attracted donations from across the world.
What is the State of Crypto in Nigeria?
Sub-Saharan Africa has seen explosive growth in peer-to-peer Bitcoin transactions, with volumes outstripping North America in recent months, and Nigeria is one of its biggest markets. Paxful reported that Nigeria was its second biggest P2P market for Bitcoin in the period of 2015 – 2020, with over half a billion dollars traded. The widespread crypto adoption amongst Nigeria’s tech-savvy youth is due at least in part to the fact that the country’s currency the Naira has lost over 50% of its value in recent years, and offers a counter-argument to the charge that Bitcoin is a ‘boomer coin’.
Given the hostility of the Nigerian regime to crypto, it may come as something of a surprise that Nigeria has become one of the first few countries to launch their own CBDC, the eNaira, but given the problems with the Naira it would also be unsurprising if it fails to dampen demand for Bitcoin.
Could Australian Accounts be Frozen?
Cryptocurrencies and exchanges are legal in Australia, so there should be no legal basis for freezing accounts. However, there have been reports this year of Australians being debanked due to their crypto activities, leading to the ANZ to settle with one of the plaintiffs. This has caused Australian regulators to warn banks against unlawful debanking practices. Despite this, Australian senators have been pushing for more crypto-friendly policies, aiming to make Australia a crypto hub, indicating that while Australia has had issues with crypto in the past it may not be at the same level of risk of having bank accounts frozen as Nigeria.
