There’s been a lot of discourse from the Central Bank of Nigeria (CBN) around the dangers of cryptocurrency, such as their involvement in illicit activity; however, there’s another side to the story that needs to be told. Given the constantly evolving regulatory situation in Nigeria around crypto, Business Insider Africa (BI Africa) reached out to Owenize Odia, Luno’s Country Manager for Nigeria, to discuss the actual use-cases and benefits of crypto to Nigeria’s financial system, as well as the difference between Bitcoin and other cryptocurrencies from the central bank-issued digital currencies.
BI Africa: Can you tell us a little bit about your background? Why did you decide to start working in the blockchain field?
Owenize: I started my career as a relationship manager at Zenith Bank and specialised in marketing. When I reached the one-year mark within my role, I decided to build my technical skills and left to do a Masters degree in Mobile Computing. Once I finished my degree, I rejoined the company as a Mobile Payment Lead.
Working in digital banking exposes you to the potential of so many different types of technology, and after a few years, cryptocurrency was starting to catch my attention. It’s money for the digital age that integrates so seamlessly into today’s online ecosystem, and in the context of Africa, it has the potential to completely revolutionise the state of our financial systems and address issues that have plagued the continent for decades.
I joined Luno in 2017 as the Country Manager for Nigeria, and since then, we’ve built our current customer base to over 4million users in the country alone and delivered educational sessions across the country to not only raise awareness of the benefits of cryptocurrency, but also teach people how to trade safely and securely. We’re the leading crypto platform in Nigeria with a growing on-the-ground team, and I’m especially proud to be heading our operations in the country.
BI Africa: Can you tell us about your company, such as what services you offer?
Owenize: Luno makes it safe and easy to buy, store, use and learn about cryptocurrencies like Bitcoin, Ethereum, Bitcoin Cash, Litecoin, XRP (Ripple) and USD Coin, and we currently have over 8million customers in 40 countries across the globe. In Africa alone, we have a growing customer base of over 5 million across our markets on the continent (Nigeria, South Africa and Uganda), and our trading volumes in Africa are over $7bn.
The main products and services we offer include Instant Buy and the Luno wallet. Instant Buy allows you to buy crypto quickly using your local currency, whilst our wallet enables you to store your crypto in “deep freeze” – the strongest-possible security consisting of multi-signature wallets protected by multiple encryption layers. We’ve also launched a savings wallet for Bitcoin, Ethereum and USD Coin, which allows our users to earn between 4% – 7.6% interest on their holdings.
As a company, our mission is to empower billions of people across the world by upgrading them to a better and more open financial system. We’re building a platform that is making cryptocurrencies accessible to everyone – whoever and wherever they are.
BI Africa: Many people outside of Nigeria fail to understand the current legal situation regarding the crypto ban in your country; please explain how you see it.
Owenize: In February earlier this year, the CBN (Central Bank of Nigeria) published a circular prohibiting banks and other payment providers from working with cryptocurrency platforms, effectively forcing Luno to pause all Naira withdrawals and deposits. Despite these developments, it’s important to note that all of our customers’ funds are completely safe, and with the exception of depositing and withdrawing Naira, all of the account features of our Nigerian customers are working as expected.
We know this situation is not an overnight fix, but Nigeria is a market that we’re still strongly committed to, and we are very keen to work with the CBN, and other relevant stakeholders, to find a solution that works for everyone and allows customers to make withdrawals, which is our main priority.
This isn’t the first time we’ve faced issues like this too. When the Malaysian Securities Commission introduced a new regulatory framework for crypto exchanges, Luno worked with regulators to become the country’s first licensed exchange. This has created an inclusive and transparent cryptocurrency ecosystem in the country, making it easier for consumers and regulators alike. We want a similar collaborative relationship with the CBN so Nigeria can continue to play a central role in the growth of cryptocurrency.
BI Africa: Let’s talk about the actual use-cases and benefits of crypto to Nigeria’s financial system. In your view, what exactly are they?
Owenize: One of the main use-cases of cryptocurrencies for Nigeria is cross-border payments. According to the Luno Future of Money Report, more than half of Nigerians said it took them more than a day to receive funds when they were transferred to them. This statistic is a cause for concern, especially when considering Nigeria as Africa’s largest economy and most dynamic business hub. If Nigeria is looking to take full advantage of the recent launch of the AfCFTA, it needs a payments system that enables a quick and reliable flow of funds for transactions across the continent.
With one global ledger system that synchronises across the entire internet, cryptocurrencies could provide the secure, instant and nearly-free option that the AfCFTA needs to thrive. The blockchain technology that supports cryptocurrencies means everyone can access the same ledger account in real-time, no matter who or where they are. The end result is that money can easily be transferred between parties without lag times and exorbitant fees.
Equally, there is a huge opportunity for Nigeria in terms of raising financial inclusion. The decentralised nature of cryptocurrencies makes it easier and cheaper to onboard consumers in the informal economy and gives them a greater opportunity to benefit from digital payments, interest on savings and investments. While it’s hard to put an exact figure on how much wealth this part of the population could provide, traditional banks have been struggling to access these customers for decades. Still, the core characteristics of cryptocurrencies could completely transform this.
BI Africa: How about claims by the central bank of Nigeria that crypto is used to fund illicit activities. How accurate is this notion?
Owenize: One of the major misconceptions is that cryptocurrencies are mainly used by criminals, which is far from the case. It’s an opinion that often arises because many people think cryptocurrencies like Bitcoin are anonymous, when in fact, it’s the opposite. All Bitcoin transactions are transparent for the whole world to see. People might not be able to link the identity of a person to their cryptocurrency transactions right away, but once they do, they can track everything you’ve ever done on a blockchain network, which makes it a particularly bad tool for illicit use.
However, whilst cryptocurrencies might actually turn out to be one of the safest ways to use money, it doesn’t mean that criminals don’t use it. Just like normal money, they do. But it’s important to note that as more data becomes available in the industry, it’s becoming increasingly clear the number of bad uses is very, very minute. For example, according to Chainanalysis, less than 1% of cryptocurrency activity is illicit, and cryptocurrency scams are not as prevalent in Africa as in other regions.
Clearly, if a giant mountain represented the entire cryptocurrency ecosystem, the size of the bad parts would be a couple of rocks. Also, similar to any financial system, the risk of criminal activity can never be fully eliminated. It can only be merely mitigated, and cryptocurrencies have some of the best tools in the world for achieving this.
BI Africa: How do we then defend against more and more sophisticated cybercrime as all our assets move to digital?
Owenize: In the context of cryptocurrencies, these assets are underpinned by blockchain, which makes them practically impossible to hack. A blockchain records and indexes transactions, creating a searchable database that only people with the right permissions can access. Think of it as a typical ledger. However, unlike a traditional ledger, blockchain is decentralised, meaning the information is not stored in a central server, but across a vast network of computers that constantly check and verify that the records are accurate. This makes hacking practically impossible because hackers need to breach at least 51 per cent of a global network to compromise the information.
Despite these assurances, it’s still vital that users know how to spot scams and phishing attacks, such as fake versions of websites and emails trying to get you to log in your details. Scammers are very persuasive and take advantage of people who are still learning about cryptocurrencies, so if you’re becoming suspicious, don’t be afraid to terminate a conversation and walk away. We’re moving closer to operating in a purely digital world, and whilst this comes with a lot of advantages, it also means we need to be even more cautious about who we trust and what we believe.
BI Africa: Let’s talk about digital currencies. What is the difference between Bitcoin and other cryptocurrencies from the central bank-issued digital currencies?
Owenize: Central bank-issued digital currencies (CBDCs) are a digital form of government-backed and issued currency, and unlike cryptocurrencies such as Bitcoin, they are not issued by a state or government and are not financially backed by them. Essentially, governments haven’t (yet) classified cryptocurrencies as legal tender that you could use as you would your local currency, whereas CBDCs do classify as legal tender.
It’s also worth noting that CBDC systems are generally implemented through a centralised database managed by a government or central bank. They will likely use blockchain technology in the same way that traditional cryptocurrencies such as Bitcoin do, but unlike cryptocurrencies, which are decentralised, monetary control would remain within the government.
How do you envision the future of digital currencies? And what do you make of the CBN’s plan to launch a digital currency?
At Luno, we see the CBN’s announcement about launching a digital currency as a positive move. We understand a shift to digital currencies won’t happen overnight; however, it’s part of a generational change driven by people who have grown up with technology and see the world differently.
Over thousands of years, money has always evolved, and most central banks would agree that the current international monetary system is now out of date. Businesses and individuals need cheaper, faster, secure and more inclusive access to money, which is why the IMF researched the macroeconomic implications of global stablecoins in 2020.
In the context of CBDCs, it’s important to remain aware that introducing this technology won’t come with a one-size-fits-all plan of action and governments and central banks should proceed with caution to mitigate any risks pertaining to their economy’s stability. However, we fully support cooperation and interaction between fiat and crypto, and if more major central banks did issue their digital currencies, we would view this as a significant step forward.
With the government clamping down globally on exchanges, what advice do you have for retail investors who are often on the short end of these regulations?
As a platform, we cannot give people financial advice on what to do with their money, but we can provide information on the available options on our platform when these situations arise. For our customers in Nigeria who were concerned about the volatility of their cryptocurrency in light of the CBN’s circular, we provided them with the option of moving their funds to USDC. This is a stablecoin pegged to the US dollar that we launched on our platform in February this year.
Customers can also send their cryptocurrency to wallets on other platforms; however, we strongly advise against sending funds to strangers offering to withdraw cryptocurrency on their behalf, as there is often a high likelihood these are scams. These situations can create a lot of uncertainty and frustration. Still, we are evaluating every option very closely to not only ensure we don’t impact the industry negatively, but that we also don’t put our customers and their funds at risk.
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