Last week the Nigerian government shocked many local crypto enthusiasts as it announced it was banning and blocking access to the country’s most popular crypto exchanges including Binance, Kraken and Coinbase. It comes a couple months after laying out regulatory requirements for crypto exchanges to do business in the country. Though the prior regulatory guidance was still restrictive compared to other jurisdictions, many saw it as a step in the right direction as previously banks were banned from working with crypto businesses and individuals. The outright ban of all popular crypto exchanges and the blaming of crypto traders for the Naira’s rapid slide is a major U-turn but largely inevitable.
Nigeria has been facing a currency crisis for the past year as the Naira has lost over two-thirds of its value against the US dollar. At the same time Nigeria’s young and tech-savvy population has been embracing crypto at a record pace with one of the highest crypto adoption rates globally estimated to be 47%. With rapid inflation and a depreciating local currency, many Nigerians have turned to stablecoins in order to hedge against the falling value of the Naira. A shortage of dollars at banks within the currency has also forced many businesses to resort to stablecoins for remittances when importing goods. It’s clear that crypto and stablecoins have been a lifeline for many Nigerians facing a doomed fiat currency.
Now with the ban in place, internet and mobile providers along with app stores are blocking access to centralized crypto exchanges. Some Nigerians have resorted to VPNs to get around the internet bans only to have their account blocked anyway because they connected through a server from the US, Canada or the UK. Binance and other centralized exchanges have pulled out or restricted access in those countries due to increasingly stringent regulations and Operation Chokepoint. The result is a loss of on and offramp providers.
Many hope for the situation to get better as governments change and the regulatory landscape improves in the US, but the reality is that governments aren’t incentivized to have their citizens adopt crypto. What they say is correct, easier access to dollars through stablecoins is causing capital flight and a loss of value in the local fiat currency – and these fiat currencies provide one of the largest sources of power governments have over their citizens. Unfortunately for them, all fiat currencies are eventually doomed but adoption of an alternative will likely converge on the US dollar until a decentralized alternative makes sense.
If you’re in crypto, separating money from state is the core tenant of why we’re here and ultimately why we’re so bullish on the technology. However as crypto gets adopted more, governments are unlikely to easily give up the control they have as both issuer and controller of the fiat currencies that play such a big role in our lives. It’s our belief at OpenPeer that even as crypto prices go up, onramps and offramp will continue to get cut off especially in countries where their fiat currency is depreciating at a rapid pace. Citizens of these countries have proven to be the biggest adopters of cryptocurrency rails and we must continue to win more over if we’re one day successful in having a non-fiat currency adopted as money at scale.
Leaving on and off ramping to be serviced by centralized entities is too big of a risk. This important core infrastructure needs to be as unstoppable and uncensorable as many of the core apps underpinning DeFi today like Uniswap, Aave and Curve. Interacting with it also needs to be as easy as making any simple online payment. Nigeria isn’t the first country to ban centralized crypto exchanges and it certainly won’t be the last. Establishing a peer-to-peer liquidity network where individuals can trade between fiat and crypto with each other in a trust-minimized way is a necessity for our goals as an industry now and in the future. At OpenPeer we’re building a decentralized peer-to-peer exchange and liquidity layer that will power on and off ramping for the transition from fiat to cryptocurrencies which we know will inevitably be adopted by billions.