Nigerian senate issues warning on cryptocurrencies

Nigerian Senate Warns Against Cryptocurrencies as Adoption Increases

Nigeria, a country considered poised to lead blockchain adoption in Africa, has recently experienced a massive bitcoin boom in the country. In light of these developments,the Nigerian senate has recently asked the country’s central bank and other regulators to “investigate the proliferation of bitcoin.” The senate also asked regulators to do more to educate citizens on the “dangers” of investing in cryptocurrencies.

Nigerian senator Benjamin Uwaiumogu expressed concern over Nigerians being advised to buy cryptocurrencies under the guise of “quick returns.” Per the senator, potential investors are often told they can triple or quadruple their investment in only a few days. The lawmaker noted that bitcoin isn’t recognized by Nigeria’s central bank, and isn’t subject to international or local regulations.

Uwaiumogu added that cryptocurrencies aren’t backed by any government or financial institution, hinting they are risky investments. Backing up his claims he pointed to Mavrodi Mundial Moneybox (MMM), a Ponzi scheme that became popular in Nigeria. It managed to acquire over two million users and awarded them with 30% interest rates per month, before collapsing in December 2016. The central bank estimates users lost over $50 million when MMM went down.

After collapsing, MMM administrators told investors to trade in bitcoin. The scheme’s move created a link between Ponzi schemes and cryptocurrencies in the country, This likely prompted the senate’s action. Uwaiumogu added:

“As Nigeria is recovering from recession, it will be devastating for our citizens to lose their hard-earned money on schemes they could easily have avoided had they been properly advised by the government”

The lawmaker further lamented regulators such as the country’s central bank and the Nigeria Deposit Insurance Commission weren’t doing enough to educate citizens, leaving bitcoin “unchecked” in the country.

The senate therefore urged regulators to make an “unequivocal statement across all the news platform” to warn the country’s citizens on the “dangers of bitcoin” as a store of value.

Cryptocurrencies keep growing in Nigeria

The senate’s stance against cryptocurrencies may come too late. According to data, Nigerians have traded over 1.7 billion naira ($4.7 million) on peer-to-peer exchange LocalBitcoins last month.

According to reports, trading via private groups on messaging apps is now common in the country. Moreover, local exchanges such as Bitcoin Afrika have been emerging to serve the market.

Bitcoin and other cryptocurrencies has been gaining popularity in the country as the central bank imposed several restrictions and regulations on dollar transactions over the last few months. Th flagship cryptocurrency allows people to circumvent them.