The ratio of revenue to GDP in Nigeria is estimated to be around 7.5%, which is low compared to other emerging countries.
According to experts, Nigeria does not earn enough income to strengthen its spending and economy.
As oil revenues run out, cryptocurrency experts point out that government regulation of digital assets ensures that the industry is properly taxed and collected and that government revenues increase.
On February 5, 2021, the Central Bank of Nigeria issued a notice instructing banks to suspend transactions with individuals and groups that handle cryptocurrencies.
While announcing the ban, Apex Bank instructed the bank to close the accounts of customers involved in crypto transactions.
“In addition to previous regulatory directives on this subject, banks want to remind regulated institutions that the promotion of cryptocurrency transactions or payments for cryptocurrency exchanges is prohibited.” I did.
Experts pointed out that this move by Apex Bank has prevented the country from profiting from tax revenues from crypto space.
They said the government would not regulate or tax digital currencies by banning this sector.
CBN has a rough relationship with cryptocurrencies and issued a warning before finally banning digital currencies.
In 2017, CBN warned financial institutions that digital currencies are primarily used for terrorist financing and money laundering.
In 2018, Apex Bank warned people investing in cryptocurrencies that they risked investing because they were not protected by law.
But globally, digital currencies are on track.
As of 8:40 am on Monday, the global crypto market was worth $ 1.75 trillion, about five times the gross domestic product of Nigeria.
According to the World Economic Forum, there are 18,142 cryptocurrencies, 460 crypto exchanges, and a market capitalization of about $ 1.7 trillion.
Every 24 hours, $ 91 billion worth of crypto is traded, most of which is Bitcoin or Ethereum. The crypto industry is huge, both locally and globally.
Since then, the world has turned the corner of digital and everything has been digitized, and it is becoming clear that legal bidding must evolve.
The 2021 ban on cryptocurrencies has set Twitter on fire as young Nigerians have used social networking platforms to express their dissatisfaction with travel.
@SirLeoBDasilva tweeted. “Are Nigeria banning crypto during a pandemic where all countries are looking at ways to invest in crypto? Are we run by people in this world?”
@ joe_blaze98 tweeted, “When Nigeria first became the second progressive, they decided to ban it.”
@El__hombre__ tweeted. So you make a decision that could destroy millions of lives and force it without notice or reason! This Sha, Na war zone is not a country. ”
Talking to our correspondent, Cryptocurrency trader Korede saw a lively phone call that day as his Cryptocurrency WhatsApp group was suffering from news of a ban on cryptocurrencies at the Central Bank of Nigeria. I said I woke up.
According to him, most people in the group thought it was fake news until they started seeing it in verified press. He said, “There was speculation of a ban before that day, but no one expected them to do it. This is a source of income for many young people.
“Before the ban, my friends and I were able to securely transfer funds directly from our bank account to the crypto wallet. After the ban, everything changed.”
Collede said the ban launched a series of events in the crypto industry, signaling new consumer behavior. He states: “This ban no longer allows you to keep your bank account connected to your crypto wallet or buy or sell using your bank card.
“I was already using a peer-to-peer platform before the ban, but its usage increased after the ban. At some point, I discovered that P2P was no longer safe. I pretended to be a good seller. Some unknowns were said to report the crypto trader’s bank account after a successful transaction with them.
“These people are still joining the P2P platform just to monitor those who are trading crypto. Therefore, the safest way right now is to buy from a known friend.”
According to him, many crypto traders now bought directly from people they know who had crypto in their wallets before the ban. He said the industry is currently regulated by word-of-mouth because traders only deal with sellers or linked traders.
“That is, you just send the coins and then get the payments between your friends. And if my friend doesn’t buy, he will introduce me to the person who buys me. I need crypto assets The same is true if you are. I will inform you of my request, then all the vendors I have will state his rate and then we will deal with it, “he added.
Collede explained that the government was missing out on new sources of income as traders devised ways to circumvent government directives and crypto traders were no longer in the formal financial sector.
He added: “I’ll give you an example to explain what they’re missing. Now, in some countries, such as the United States, you can use dollars to buy BTC or send BTC to others. There are coin machines. This will generate revenue / profit for the government. We will charge every transaction on those machines. “
In 2021, Paxful, a cryptocurrency P2P company, said Nigerians traded at least 316.9 billion N in Bitcoin in 2021, despite a CBN ban. According to the company, in 2021 there were over 6 million crypto transactions and 16,000 transactions per day on the Nigerian platform.
“Nigeria is the largest trade volume-based country, with trade volume exceeding $ 760 million last year,” the company said.
According to reports from another crypto platform, approximately 33.4 million Nigerians trade or own crypto assets. In the 2021 Global CryptoAdoption Index, global blockchain analytics company Chainalysis ranked Nigeria as the sixth largest country in the world for crypto adoption.
The cryptocurrency market in Nigeria and other African countries grew 1200% in 2021. According to the International Monetary Fund, low-income countries are at the forefront of crypto adoption, with countries in the region in 2021.
According to Chimezie Chuta, founder / coordinator of the Blockchain Nigeria User Group, the government has effectively reduced the benefits of the crypto boom by banning digital currencies.
He states: “The regulatory issue was a permanent battle between Nigerian legislators and policy makers, and the blockchain and crypto industry, which probably lasted for three years, and the Securities and Exchange Commission intends to understand it. Had
“Unfortunately, in February 2021, the Central Bank of Nigeria released a circulation that restricted financial services providers from interacting with and trading with cryptographic entities, but it never adopted crypto assets in Nigeria. It didn’t hurt. ”
He said digital assets are technologically driven and are not limited by market restrictions. The actions taken by the regulatory authorities do not affect them, as they can take their own form and the market is always open.
“In my opinion, unregulating is a big downside for economies that want to support their income through taxes and foreign direct investment. It regulates fast-growing sectors like crypto. Not doing it is counterproductive.
“As a result, the country has lost a lot of money and a lot of income that could come as VAT, because it cannot be taxed without regulation. Paxful, the largest P2P company in Nigeria, or the largest in Nigeria. See the figures for Binance, the blockchain platform of.
“They do business, but without regulation, they can’t properly determine what taxes will be incurred. This counts as a loss to the country in terms of income. In most cases. Tell them that it is bad not to regulate, because there is nothing that can sufficiently stop the operator’s activity when trying to work with the SEC, CBN, or other regulatory bodies, and license the operator. Or, if you don’t tax your profits, your country is losing income. ”
According to him, it was important to understand them and how they work in order to effectively regulate blockchain and cryptography.
Mr Nakata said the technology of digital assets should be regulated by national technology agencies. He said blockchain, which also handles digital assets, could become a financial product for financing and interact with Nigeria’s capital markets.
He added: “In that respect, we have the SEC as the authority that should be able to regulate it. In all aspects of currencies and digital currencies, and in all aspects of technology’s interaction with financial issues, CBN is a financial instrument. Is also working and needs to be regulated. ”
Chuta further said that without regulation, institutional investors would not trade directly in the unregulated sector and would not play directly in the crypto ecosystem. According to him, institutional investors often brought large amounts of money to the table, and this money could easily expand the ecosystem.
Zainab Ahmed, Minister of Finance, Budget and National Planning, had previously admitted that the federal government had revenue problems.
According to her, the government was struggling to make enough money to cover its spending. To increase income, Ahmed recently announced an increase in taxes on sodas.
“To further strengthen independent income generation, the government aims to optimize the operational efficiency of state-owned enterprises and the focus of income generation,” she said.
As oil revenues continued to decline, the government began to expand its net value to other sources of non-oil revenues. Recently, Meta announced that it will impose a 7.5% VAT on the sale of ads to Nigerian advertisers.
This is in line with the government’s plan to tax digital transactions. If the government applies 7.5% VAT to Paxful’s income, it will earn about 23.77 billion N. This exceeds the internal income of individuals in 2020 in more than 24 states in the country.
Central banks are beginning to look for digital currencies in response to digital assets.
According to a PricewaterhouseCoopers report, about 80% of central banks are considering or have already implemented digital currencies. CBN launched the digital currency e-naira in October 2021.
This is commendable, but according to the IMF, crypto assets have significantly changed the international currency and financial system.
The crypto economy has led to the development of alternative financial and technological infrastructure that is globally open source and accessible to all who have access to the Internet, regardless of nationality, ethnicity, race, gender or socio-economic class. rice field. World Economic Forum.
Prior to the announcement of the CBN, the SEC sought to provide regulatory certainty within the digital asset space as a result of the increased volume of reported flows. It described digital assets, including crypto assets, as securities and said they would regulate them.
With a market capitalization that exceeds GDP in many countries, it is important for domestic regulators to revisit crypto bans, especially as the market is responding to rising transactions despite market bans. It states.
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