Bitcoin made its remittance debut in the country of Nigeria with a plethora of fanfare as the latest disruption to financial transactions. Since 2015, the positive response from the citizens has taken the government and competition by surprise. This has caused the central bank of the country to develop regulatory standards and guidelines for this new form of currency to adhere to. The competition has also made waves by showcasing how it has filled the niche that Bitcoin is trying to reach. There are also stereotypes for any crypto-currency due to the untested security and money laundering concerns. While this is all being sorted out, the country continues to see widespread acceptance by its citizenry to take part in using this innovative technology. Here is a look at the various remittance challenges Bitcoin faces in Nigeria.

History of Bitcoin Remittance in Nigeria

Money transfers or remittances are ubiquitous financial transactions that occur around the globe throughout the day. It is a multi-billion dollar industry with established and new companies engaged in the practice. The Nigerian marketplace is an ideal testing ground for the African continent due to the millions of possible consumers. The initial response by the government was to follow the free trade paradigm of capitalism without regard for regulating the new industry. However, some Bitcoin service providers began to demonstrate a lax in procedures such as circumventing foreign exchange rules. This issue raised the ire of the Central Bank of Nigeria to take a closer look. After a review, they have determined that legislation was in order for the use of crypto-currencies to continue in the country.

Legislative Hurdles

The Central Bank of Nigeria has recently enacted a three step process for existing Bitcoin providers and those that want to enter their consumer market. The first legislative hurdle they face is to register under the money transmitter classification before services can start. During the registration, businesses must stipulate their intentions and scope of services to be provided. Once these two mandates are met, a third requirement is the conversion from Bitcoin to the country’s naira currency. These newly minted standards are enacted to ensure the public is protected from fraudulent activities. Groundwork was laid for the initiative by striping some current providers of their licenses while recognizing others as acceptable. Expectations are that more stringent laws are sure to follow these minor steps.

Competition

A few companies remain in the money transfer space including MoneyGram. In fact, they have been chosen to be the standard bearer by the Central Bank of Nigerian. They are allowed to drive product improvements in delivery and other areas. To bolster this relationship, a multi-million dollar investment has been made designating Lagos as the hub for its African operations. The new legislation eliminated the bulk of questionable providers in the remittance space leaving only the reputable ones in place. This is good news for the citizens that demand more options than MoneyGram to send and receive funds. On the other hand, access to the space for interested businesses such as Bitcoin has become a difficult proposition.

Stereotypes of Crypto-currencies

The invention of crypto-currencies like Bitcoin comes with negative stereotypes including the possibility of being used as a money laundering instrument. This is due to the complete electronic platform where the currency exists. Nigeria is in-line to join Luxembourg, Australia, Germany, and Switzerland to develop standards such as a Digital Currency Industry Code of Conduct. According to Dr. Okwu Nnanna, the Deputy Governor of Financial System Stability at the Central Bank of Nigeria, the ambiguous context of virtual currency demonstrates it does not reach the standard of legal tender. This sentiment highlights the concern of illegal activity with Bitcoin transactions.

Security and Money Laundering Concerns

This article has already mentioned the security concerns of crypto-currencies along with the ability of transactions to avoid exchange laws and regulations. A rationale for this and the money laundering perspective comes from the lack of a tangible jurisdiction. The argument is the border-less construct of the currency make it ideal for these types of untoward practices. Since money remittance contributes 21 billion dollars to the Nigerian markets, establishing policies to track, measure, and monitor Bitcoin remittance is a prudent idea.

The inventors of currency and crypto-currencies do not consider the inevitable nefarious issues that can arise from their use. Instead, they rightfully left these concerns for governments and consumers to hash out. Any form of remittance including those using Bitcoin demands that steps be taken to ensure the global trust of citizens is protected. Nigeria is the latest country to be faced with this reality.