24th December 2023 > > Nigeria.

tl;dr

Nigeria is the latest country to row back on crypto restrictions, for the benefit of all its citizens.

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Seeing as its already Christmas day here in Australia, I don’t feel any pressure to write about markets, because do you know what is going on? Nothing, zilch, nada, kiiny.

Curious Cryptos’ Commentary – Nigeria

Nigeria used to be a global leader in the “banning” of cryptos. At one stage, taking a cue from ChokePoint 1 and 2, banks were ordered to close the accounts of all crypto-related firms. The local regulator was told to outlaw any crypto related activities, and personal ownership of cryptos was made illegal.

These series of steps led to the obvious (obvious to us, not to the lawmakers) result that the local price of BTC soared to premiums of 100% or more, whilst transactions reverted to the P2P model which we saw in the UK and the US before centralised cryptocurrency exchanges became fully established.

Jumping on the CBDC bandwagon (the one that is currently occupied by all countries other than the US, Switzerland, and Slovenia) the political elite appeared to have fallen victim to the fallacious argument that a state-sponsored non-crypto digital currency would be able to fulfil all the functions of a private, permissionless, and trustless blockchain solution. Ah, bless them, and all the other politicians (looking at you Convicted Criminal Christine Lagarde) who believe this to be true. The naivety on display is very sweet.

It has been reported in Nigeria (https://businessday.ng/technology/cryptocurrency/article/cbn-lifts-restrictions-on-crypto-exchanges-issues-guidelines/) that an about-turn is about to happen. The Central Bank of Nigeria has lifted restrictions on VASPS, though with certain restrictions, including an up-front deposit of N500mm, approximately $500k. This requirement has nothing to do with the current lack of Naira in circulation in the economy, even though the Naira has fallen by 100% or more against the dollar in just the last twelve months. Supply restrictions of a commodity (all currencies are commodities) accompanied by continuing price falls is a weird situation that is probably unprecedented in financial history.

Kudos though to the political elite in Nigeria who are looking for creative solutions to their economic woes other than rampant money-printing, the default option for the US, the UK, and the EU.

Will cryptos solve their problems? Probably not without other measures, but cryptos can turbocharge the positive impact of other supply-side reforms.