AMID rising uncertainty over the future of cryptocurrency, the groundwork for bitcoinsation may have started in earnest.
This comes exactly a week after El Salvador adopted bitcoin as legal tender. The Salvadoran government last Tuesday foisted bitcoin on the ill-prepared citizens after it credited each of the citizens with a $30-in-bitcoin incentive.
The historic bitcoinisation (a term coined to refer to adopting bitcoin as a primary means of exchange) is being generally criticised as too hasty. Salvis, who are less unsure of how their hard-earned incomes will be preserved under the new monetary regime, took to the streets while their wallets were still being credited with the take-off incentives.
Interestingly, first users had instant insight into what the future means for their wealth. Their pat-in-the-back sovereign gift plummeted by about 17 per cent the same day they received it as the value nosedived from $52,000 to $43,000 within an hour in what turned out to be the steepest fall in recent times. Since then, the cryptocurrency market has seen an industry-wide validity shot up to a head-scratching high, raising fresh concerns about the future of the novel assets.
The renewed anxiety, notwithstanding, Nigeria may be fretting with its version of bitcoinsation. Findings, at the weekend, suggested that the number of young Nigerians holding stable coins not as an investment but for peer-to-peer (P2P) exchange is increasing at a fast speed.
Clusters of youths in different Lagos metropolises, it was learnt, now settle transactions using stable coins such as USDT and BUSD. USDT and BUSD are privately issued stable coins with a par value with the United States dollar. The value of other cryptocurrencies is benchmarked on USDT and BUSD, which are as stable as fiat currencies.
This is not the first time Nigerian youths would be romancing with the possibility of transacting in cryptocurrency, sources have suggested. But the recent slide in the value of naira coupled with uncertainty in regulatory position on dollar-denominated bank accounts has pushed even non-believers of crypto into moving their savings to digital wallets.
The local currency has been on free fall, hitting N550/$ today. The renewed crash followed the technical freezing of activities of bureau de change (BDC) by the Central Bank of Nigeria (CBN). Experts said the coming months may be more damning for the exchange rate. The CBN, meanwhile, continues in its self-denial, insisting that the black market condition does not represent reality.
Deposit money banks (DMBs), saddled with the sole responsibility of retail foreign exchange sale through personal/business travel allowance (P/BTA), have engaged in racketeering while the apex bank barks. Last week, it warned that it would revoke FX participation licences of banks involved in rent-seeking.
“I am a friend of USDT now even though I don’t trade much. In the past months, I have lost count of the number of times I transact with USDT. And it has a lot of advantages, as far as I am concerned.
“If naira falls at this moment, the exchange rate on the wallet adjusts immediately to reflect black market price. That means I don’t lose anything whether I choose to spend my money in dollars or convert to naira to spend,” Paul Ime told Naija Times.
While individuals who are currently transacting businesses and settling financial commitments are still few, the number is growing very fast in youth-dominated neighbourhoods such as Yaba and Surulere. Yaba is dominated by students and natural fintech enthusiasts.
A source said some in-groups in Yaba pool financial resources for common purposes in stable coins as they find it cheaper and more convenient. Wallet-to-wallet transfers on some exchanges are almost free. The CBN banned the financial institutions from processing transactions relating to cryptocurrencies earlier in the year. But the ban only reinforced P2P trading, which is the original underlying concept of the business.
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