Nigeria’s increasingly digital social payments app, Bundle, recently announced the closure of its cryptocurrency exchange services. This change in policy comes amid a growing conflict between the state of Nigeria’s Central Bank and cryptocurrency firms and users. The shutdown of Bundle’s exchange has thrown the industry into uncertainty, as users and firms alike seek to navigate this regulatory landscape.
1. Nigerian Social Payments App Suspends Cryptocurrency Exchange Services
The Nigeria-based social payment app Carbon has suspended its cryptocurrency exchange services. The company cited regulatory uncertainty as the reason they had to suspend the service. This has caused a stir among the blockchain and cryptocurrency communities in Nigeria.
This regulation uncertainty includes the decision whether cryptocurrency will be considered a legal form of currency and payment or not. A number of other African countries have already decided to regulate cryptocurrencies. Their decisions have a strong influence on the decisions of the Nigerian government.
The Nigerian government said it will provide regulatory clarity on digital assets such as cryptocurrency soon. Until that time, companies like Carbon have pulled out of cryptocurrency exchange services, due to the lack of regulatory clarity.
- Cryptocurrency communities in Nigeria are concerned about the lack of regulatory clarity.
- A number of other African countries have already decided to regulate cryptocurrencies.
- The Nigerian government will provide regulatory clarity on digital assets soon.
2. How the Shutdown Affects Existing Crypto Exchange Services
Government Interference
The Indian government’s decision to ban crypto trading challenges existing and prospective users of crypto exchanges in the country. These exchanges have relied or were relying on the Indian banking system to process payments and conversions into and from fiat currency, as is common practice. The RBI’s decision to prevent banks and financial institutions from providing such services, renders most crypto trading virtually impossible in India.
Confusion and Uncertainty Among Cryptocurrency Traders
The government deserves some credit for clarifying that it has not banned cryptocurrencies in India. Despite this, many traders express frustration and uncertainty due to the increasingly restrictive regulations. The government’s announcement has left many in a quandary on how to move forward with their investments- whether to wait for further clarity or to divest and seek alternative markets.
Exchanges Adjust to Regulatory Environment
The Indian cryptocurrency ecosystem is currently in a period of transition. Crypto exchanges have responded to the changed landscape in diverse ways, experimenting with features and tools to enhance user experience. Many have introduced ‘peer-to-peer’ trading networks that bypass the need for a bank or payment gateway to facilitate consumer transactions. They have also attempted to develop products such as stablecoins and options market-based contracts.
3. Impact of the Shutdown on Nigeria’s Digital Payments Ecosystem
The three-month-long coronavirus-induced lockdown in Nigeria has had a significant effect on the country’s digital payments ecosystem.
First, the disruption has presented a major setback for the expanding digital payments industry, which saw rapid growth in the recent past before the pandemic. Early movers in this field had been planning to expand their services in Nigeria and this expansion has been suspended due to the restrictions on movement and the lack of available capital.
Online Payments
- The short-term impact of the shutdown has been felt particularly strongly in the online payments sector, where transaction volumes have decreased significantly due to the lack of customers able to pay.
- Merchants have also suffered as their customers have reduced their spending, leading to a drop in revenue.
- The government’s own digital payments system – Gtpay – has also been affected, seeing fewer transfers as people have become more conservative with their spending.
Mobile Payments
- The mobile payments sector has also been affected as customers have been unable to use their phones to make payments due to network outages caused by overburdened networks.
- The lack of connectivity has made it difficult for mobile-based applications such as Paystack to operate as required.
- Mobile networks have been further strained as people are using more data due to the increased use of online services for entertainment, communication and education.
ATM Payments
- The shutdown has also had an effect on ATM payments as banks have limited customers’ access to their cash stores.
- The installation of cashless ATMs has made it difficult for customers to access their funds, leading to a decrease in ATM transactions.
- The decreased availability of cash has also impacted e-commerce transactions, leading to fewer online purchases.
4. Future of Crypto Exchange Services in Nigeria
Nigeria looks set to become one of the world’s leading cryptocurrency markets in the near future. Fintechs and crypto exchanges across the continent are making it easier for Nigerians to buy and sell digital assets. With the recent announcement of the CBN’s regulatory sandbox opening up the Nigerian cryptocurrency market, there is plenty of potential for growth.
In addition to the new regulations, more Nigerian businesses are taking advantage of crypto exchange services. They are able to offer services to customers outside of the country, and this provides opportunities to make transactions anywhere in the world.
The future for crypto exchange services in Nigeria has a lot of potential. Along with the welcoming of more fintechs and regulation of the crypto market, more Nigerians are likely to embrace cryptocurrency in the near future. Most notably, the growing number of businesses that are investing in cryptocurrencies and offering trading services to their clients, and the increasing number of exchanges providing crypto trading platforms.
The closure of the Nigerian social payments app’s cryptocurrency exchange services has been marked by a number of disappointed customers. With the introduction of the Central Bank of Nigeria’s crypto ban, this likely marks the end of Nigerian crypto exchange services for now, and it remains to be seen if the CBN’s directive will be enforced in its entirety.