Author: Rahul

Earlier in February, the central bank of Nigeria banned its banks and financial institutions from servicing cryptocurrency exchanges. Nigerians now have little to no options to convert their local currency to bitcoin and cryptocurrency – which I suppose was the objective.

Central Bank of Nigeria bans banks from servicing crypto exchanges

Nigeria’s central bank has banned financial institutions from rendering services to crypto exchanges.

A few things in this context are notable:

~ This sounds identical to the 2018 ban by Reserve Bank of India.

~ Bitcoin is now trading at nearly a 50% premium in Nigeria: see http://www.bitcoinpricemap.com

~ Since there are no online exchanges, this is probably on local P2P markets like https://localbitcoins.com . This is as transparent a signal as you can get for how desirable cryptocurrency is there. Bitcoin in Malaysia, Indonesia, India, Turkey, and most South American countries is also trading at significant premiums – although Nigeria is off the charts.

~ Late last year, there was press coverage internationally on how anti-police-brutality protestors were using bitcoin (and potentially other tokens) to raise funds:

Nigerian Banks Shut Them Out, So These Activists Are Using Bitcoin to Battle Police Brutality

As End SARS protests against police brutality surge through Nigeria, the Feminist Coalistion has turned to bitcoin as a financial lifeline.

~ Throughout 2019 and 2020, Nigeria topped Google trends for searches around bitcoin. One reason could be simply because Nigeria’s currency really hasn’t done well versus the dollar, or simply because Nigeria is a very young country and there’s curiosity about crypto:

Why Nigeria Tops Google Searches for Bitcoin

Nigeria consistently tops Google searches for Bitcoin. A collapsing naira currency and pop culture have brought Bitcoin increased acceptance.

This article in this week’s issue of The Economist is a decent overview of central bank digital currencies, or governments issuing their own cryptocurrency.

What is the fuss over central-bank digital currencies?

For central banks, digital cash offers a safer, faster and more flexible alternative to notes and coins

According to the article, the main difference between these and the cashless payment systems we already use is “money held on a CBDC app or website will be equivalent to a deposit at the central bank”. Similarly, the article predicts, money held in private payment/wallet apps will still be equivalent to being held at the bank, not on the payment providers’ balance sheet.

I was disappointed that the article made only one passing reference to the programmable nature of digital currency, something that is widely done in crypto projects today’s using “smart contracts”, often the most innovative part of such projects. Back in September 2020, I had explored this topic myself in more detail:

JPMorgan Joins Choir Warning of Tether’s Sway on Crypto Markets

Questions about the influence of Tether continue to swirl in cryptocurrency markets, even as the companies behind it defend the so-called stablecoin’s soundness.

Tether, or USDT, is supposed to be a ‘stablecoin’, always valued at USD 1 because it’s supposed to be backed by actual USD cash reserves. That’s been under question for years now. But it hasn’t stopped the token from being widely traded exchanges and used as part of financial products based on crypto:

It has a market capitalization of about $34 billion, according to CoinGecko — but in a sign of how much it’s used in the system, the 24-hour trading volume on Friday was about $107 billion.

– JPMorgan Joins Choir Warning of Tether’s Sway on Crypto Markets

Essentially, if USDTs are simply created out of thin air without needing to be backed by anything, unlike other crypto tokens that need to be mined, then the company behind Tether is simply a parallel US Federal Reserve.

About five months ago, the VC Chamath Palihapitiya made the case for Bitcoin as the ultimate insurance, a “bet against the ruling class”

“So [Bitcoin] is almost like a bet against the ruling class in some ways and making sure you have a small amount of insurance because… insurance is not something that pays off 50 cents to the dollar, insurance is something that pays off… 1000 bucks to a buck. You want these massive, massive asymmetric payoffs because you want to be sure that a small amount of insurance can basically make you whole… that’s why I just think that… you should take 1% of your portfolio, put it in Bitcoin, never look at it.”