AMA Recap: The Fate of Cryptocurrency in Nigeria with Senator Ihenyen, President, SIBAN.

This is the Transcript of an AMA with Senator Ihenyen, President, SIBAN. The AMA was hosted by Niran of Beam Africa on the Beam Africa Telegram Channel on Saturday 20th February 2021 at 5:00 PM WAT

Niran(Moderator): Hello Everyone! Welcome to a very exciting AMA, held exclusively for you, the Beam Africa community.

Today we have with us @SenatorIhenyen, President of SIBAN together we’ll be discussing the Fate of Cryptocurrency in Nigeria.

FEAR NOT!

You’ve not been banned. We’re having the much-anticipated AMA with Senator Ihenyen, which will be divided into 2 sections.

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Now, let’s get started!

Niran(Moderator): We are glad to have you here with us once again.

Senator Ihenyen,

Thank you very much. It’s great to be here!

Niran(Moderator): I’m certain many in the Nigerian and African crypto space, know who you are, but to our international audience, and crypto noobs who aren’t familiar with you or are new here, can you

please tell us a little about yourself?

Senator Ihenyen: I’m Senator Ihenyen, the President of Stakeholders in Blockchain Technology Association of Nigeria (SiBAN). A former Vice President on Blockchain Policy & Regulations and immediate past General Secretary at SiBAN, I’m currently the General Secretary of the Blockchain Industry Coordinating Committee of Nigeria (BICCoN), the intercommunity working group in the space.

A lawyer, I’m Lead Partner at Infusion Lawyers where he heads the Blockchain Practice and the Intellectual Property & Technology Practice. I’m an exclusive contributor (Nigeria chapter) to the International Guide to Blockchain.

Niran(Moderator): Awesome!!

Tell us a little about siBAN and what they are doing for the crypto space in Nigeria

Senator Ihenyen: SiBAN, founded in July 2018, is a self-regulatory body in Nigeria’s emerging blockchain industry. SiBAN has membership drawn from both corporate and individual players in the blockchain & crypto space and protects the interest of its members and the blockchain community at large. SiBAN drives blockchain education and awareness, discourages scams and bad actors in the space and contributes to policy and regulations on crypto and blockchain through advocacy, education, and engagements with regulators and policymakers. Recently, we became recognized as a key stakeholder in the blockchain community by the National Information Technology Development Agency (NITDA) where we are contributing to the proposed National Blockchain Adoption Strategy. More about SiBAN can be found here www.siban.org.ng

Niran (Moderator): Interesting.

SIBAN is leading the adoption of blockchain and its product in Nigeria. Awesome

Senator Ihenyen: Yes! Thanks to our members, including a supportive Beam Africa community!

Niran (Moderator): 🙏

Niran (Moderator): Over the weeks, the Central Bank of Nigeria which is the apex bank of Nigeria, placed a ban on the operation of banks & financial institutions, restricting them from servicing crypto exchanges in Nigeria.

They even went ahead to instruct banks to close the accounts of crypto exchanges in the country.

What is your take on this new development and its ripple effect on the entire blockchain ecosystem in Nigeria?

Senator Ihenyen: First, it was with a shock that the blockchain & crypto industry in Nigeria received the news of the directive in the CBN circular of 5 February 2021. This is for three major reasons: (1) it was done without any engagement with or notice to industry players; (2) it was coming after 3 years of the CBN’s initial notice which at least allowed banks and other financial institutions to continue to render services to the crypto industry as long as they complied with KYC/AML requirements; and (3) it is retrogressive, considering that Nigeria crypto industry is one in Africa and a global leader.

Senator Ihenyen: So my take, is that while the CBN has the responsibility of ensuring a sound and safe financial system in Nigeria, this responsibility should not be carried out in a vacuum, but with a comprehensive understanding of the place of emerging technologies in the 4th industrial revolution and how blockchain & crypto apply. The CBN and other regulators should, rather than ban or introduce overly restrictive approaches, should consider both the opportunities and the threats, and work collaboratively with stakeholders to ensure that they use their regulatory authorities to reposition Nigeria leveraging on these technological innovations.

Senator Ihenyen: Cryptocurrency is a product of technological innovation, not some evil that should be fought. It is an innovation that deserves regulatory understanding through a reimagining of the role of regulation in an increasingly decentralized economy.

Senator Ihenyen: On the ripple effects of the CBN ban, here’s a list I came up with as also contained in the press release issued by BICCoN this week:

Senator Ihenyen: If not reviewed or reversed, the CBN ban may have the following unintended consequences:

1. The eventual death of centralized cryptocurrency exchanges in Nigeria, particularly indigenous cryptocurrency exchanges who should be getting regulatory support to become globally competitive;
2. Job losses, directly and indirectly;
3. Stifling crypto innovations across the entire ecosystem;
4. Limiting crypto trading to wholly unregulated decentralized platforms where unenlightened and unsuspecting members of the public will be more vulnerable to scams, making the Nigerian crypto space a den of criminals;
5. Pushing all crypto-based remittances to the informal economy, away from the formal economy that would have benefited the country;
6. Cutting out transaction fees for DMBs, NDMBs, and OFIs who should be facilitating cryptocurrency transactions for customers who wish to buy or sell cryptocurrencies or other virtual assets through centralized exchanges;
7. Cutting out centralized cryptocurrency exchanges who are the traditional gateway to the cryptocurrency world and who should be the most reliable ally to regulators for the purpose of AML/CFT regulations and customer identification, verification, and monitoring;
8. Practically illegalizing and criminalizing cryptocurrency trading and cryptocurrency exchange services, resulting in further discrimination, harassment, extortions, and unlawful arrests by ill-advised, unethical, and opportunist law-enforcement officers;
9. Opening DMBs, NDMBs, and OFIs to avoidable litigations in a country where justice administration continues to suffer the plague of delayed justice, lack of rule of law, and lack of trust in the judicial system;
10. Foreign blockchain & crypto businesses will move out of Nigeria to other countries where the business and investment climate is less hostile or more friendly to crypto innovations;
11. A number of indigenous blockchain & crypto businesses will shut down completely while others may explore setting up their businesses offshore, costing Nigeria not only loss of income but also loss of its talents to other countries;
12. Increase in cybercrimes due to lack of economic opportunities available to young people to channel their energy, innovation, and talents positively; and many more.

Niran(Moderator): interesting!! thank you.

Niran(Moderator): With the ripple effect of the CBN ban on cryptocurrency and its impact on the entire blockchain ecosystem in Nigeria. Do you think Nigeria can still lead the adoption of blockchain products in Africa?

Senator Ihenyen: Yes, we hope that the CBN rethinks this and introduces something more innovative and responsive to the needs of Nigeria!

Though the CBN bar of banking services and financial services to persons and entities involved in crypto and crypto exchange services is a BIG blow, I think that Nigeria still has a chance to lead crypto adoption. I will explain why below:

Senator Ihenyen: Crypto waits for no one, Crypto moves. The last person or group of people crypto would wait for are regulators and policymakers. In fact, crypto has been designed in such a manner that is decentralized and really doesn’t need centralized forces or bodies to make it grow.

Senator Ihenyen: Below is an excerpt from an article I am writing on this subject:

“Change is constant. Innovation drives change. Cryptocurrencies are innovations and it is already driving change. However, any way anyone plays the Ostrich by deepening his or her head in the sand, cryptocurrencies exist. They will continue to exist. And cryptocurrencies are an unstoppable force. Attempting to stop cryptocurrencies or digital assets in 2008 is akin to attempting to stop the Internet in 1991. Similarly, attempting to stop cryptocurrencies in 2021 is akin to attempting to stop the Internet in 2010. It is futile.

Five years in crypto is akin to 20 years in the first generation of the Internet, the Internet of communication. Blockchain is the second generation of the Internet, the Internet of value. Cryptocurrencies are blockchain technology’s first and most popular application. Anyone who cares to study and understand this innovation understands that any attempt to stop it will fail. In fact, such attempts often boost its adoption in a more democratized, distributed, invincible, and ubiquitous way, not hinder it. So rather than futile attempts at stopping it or resisting it, it is far beneficial to reposition oneself for change, leveraging it for competitiveness in the global, digital economy.”

Senator Ihenyen: In other words, the positive effect of the CBN action is to challenge crypto innovators to do two things:

1. Re-embrace the Satoshi dream of peer-to-peer, network money without any need for third parties or Central banks.
2. Invest in P2P technology and completely separate the crypto world from the fiat World.

Senator Ihenyen: You tell me, @o_niran, if the above happens, who loses?

Niran(Moderator): The CBN loses

Senator Ihenyen: Big time. The CBN would be effectively rendering itself irrelevant.

The present state of the crypto-fiat relationship is as good as an olive branch from the crypto world to the fiat world.

Niran(Moderator): Interesting!!

Senator Ihenyen: Countries who understand the above are not being begged to embrace crypto and regulate it. They are investing resources to ensure that crypto does not render them behind. They understand how crypto, especially its stable coin application, can help enhance the competitiveness of the old, tired, not-fit-for-the-digital-economy fiat system.

Senator Ihenyen: The CBN ban is, with due respect, a product of myopia.

Niran(Moderator): Truth!!, very shortsighted

Senator Ihenyen: Yes!, but guess what? Nigerians, ever-innovative, industrious, and self-motivated, will adopt crypto even more!

Senator Ihenyen: Here’s a part of my article further reacting to this:

“That said, as much as the crypto industry would love to wait for policymakers and regulators to catch up — or at least demonstrate the level of understanding and open-mindedness needed to have any chance at catching up — crypto innovation itself waits for no one, including its innovators. The continual evolution of cryptocurrencies does not need anyone to continue to evolve with it, not even Satoshi Nakamoto, the inventor of Bitcoin. So the question is not whether cryptocurrencies are ready to evolve. No. Rather, the question is and has always been: Are we ready for the benefits of evolving with cryptocurrencies or are we prepared for the consequences of being left behind? Industry players and millions of Nigerians choose to be ready. We will not be left behind.”

Niran(Moderator): Thank you

Niran(Moderator): What is SIBAN doing to change the new direction both from the legal standpoint and also as an association? considering the panic going on among investors and other stakeholders in the crypto ecosystem in Nigeria.

Senator Ihenyen: In my capacity as SiBAN President, as soon as I was sworn in in the last week of December 2020, I started working with other industry stakeholders to put structures in place to ensure that Nigeria’s blockchain has a more coordinated approach to blockchain adoption, policy development, and regulation.

In January 2021, before the CBN ban, SiBAN formed with the two other bodies in Nigeria, Blockchain Nigeria User Group (BNUG) and Cryptography Development Initiative of Nigeria (CDIN) to form BICCoN.

BICCoN is Blockchain Industry Coordinating Committee of Nigeria (BICCoN), the intercommunity working group in Nigeria’s emerging blockchain industry.

Through BICCoN, we already set up an Anti-Scam Task Force in January that was studying crypto scams and due to submit its recommendations to Nigeria’s Securities and Exchange Commission (SEC) this month.

So before the CBN came up with its letter where it identified money laundering, scams, and other illegal activities as the reason behind its ban, this was an area we were already looking at comprehensively and we are prepared to submit our recommendations to the CBN on this.

At BICCoN level, we have also made efforts to engage with the regulators directly. But already, we issued a press release to enlighten the members of the public about what cryptocurrencies are and tried to address all the issues the CBN raised.

Niran(Moderator): interesting!!

Senator Ihenyen: Here’s the press release https://siban.org.ng/press-release-issued-by-blockchain-industry-coordinating-committee-of-nigeria-biccon/

This press release has been well received, locally and internationally.

Since the issuance of the press release, concerned local and international players have reached out to us to render moral and technical support.

Just two days ago, I was in a meeting with the director of a global crypto association that is already working with us to develop a comprehensive framework for managing AML/CFT regulations from a crypto angle.

This afternoon, I was in a meeting with the Fintech Association of Nigeria, one of our affiliate bodies, to discuss ways we could engage the National Assembly.

We have been invited by the Joint Committee set up by the Senate to submit a position and also appear in Abuja.

Niran(Moderator): This is a very thoughtful move, sadly the Nigeria government sees everything as a nail to their hammer.

Senator Ihenyen: Unfortunately.

Senator Ihenyen: We hope to be able to show the CBN and other regulators compelling reasons why it should review its decision.

Niran(Moderator): What Challenges is SIBAN facing in this regard at the moment?

Senator Ihenyen: There are several challenges and they are as follows:

1. Lack of Stakeholder Engagement: Unlike the regulatory approach of the SEC and NITDA, the CBN has not been very open in its regulatory work in the crypto space, resulting in needless misunderstanding and lack of trust. Even after the CBN identified in its 7 February letter the reasons for the ban, there are stories flying around the space but those reasons being only a mere smokescreen.
   There appear to be deeper reasons. Without a multi-stakeholder engagement between the CBN and other stakeholders, it will be difficult to really understand what the CBN is really worried about.
2. Negative PR against crypto: Since the second letter released by the CBN, there has been noticeably a negative PR movement against crypto, with platforms associating crypto with illegal activities such as terrorism, money laundering, Ponzi schemes, etc. As industry players, while we acknowledge that cryptocurrencies are susceptible to being used to perpetuate crimes, we don’t think it is right to give a dog a bad name to hang it.
   To address the negative PR, we have been involved with media engagements, enlightening members of the public and the media about what cryptocurrencies really are. We have been on local and international TV, radio, and newspapers. Happily, in the last week, the campaign against crypto has turned positive.
   It is a big thank you to all the brands in the space who supported our efforts.
3. Lack of national policy on blockchain: This is a serious challenge. Because Nigeria is yet to have a national policy on blockchain, being on the same page with the SEC does not mean the CBN or other agencies are on the same page with you. So you find that no matter how deep your engagements are with a particular government agency or body, another agency may come up with a conflicting policy and there is nothing you can do about it as each agency has its own statutory duty.
   Before the CBN circular, industry stakeholders had done so much with the SEC, leading to the SEC statement in September 2020 of its readiness to recognise digital assets as innovative assets and why cryptocurrencies would be treated as commodities.
   We have also been in touch with NITDA, where we are in the same roundtable with SEC, CBN, FIRS, NDIC, NIBBS, and other government agencies on the blockchain adoption strategy for Nigeria across various sectors of the economy.
   So you can imagine the shock and frustration when the CBN practically turned the table 2 weeks ago.
4. Funding: I cannot overemphasise that. All our activities need capital. As an NGO, we continually rely on members and friends of SiBAN to support our efforts in the space. If the CBN crypto ban episode has taught us anything, it is the need to have a vibrant fund base.
5. Industry players cooperation: For a decentralized industry as ours, it is not very easy to bring everyone together on a roundtable. Big and small, everyone has its own approach to adoption, policy, and regulatory issues. Through SiBAN and other similar bodies, we continue to aggregate diverse opinions and articulate them in the best interest of the industry.
   That’s all.

Niran(Moderator): Thank you, Senator.

Senator Ihenyen: 👍

Niran(Moderator): We’ll end this section here and then open the group to take questions from the community.

Senator Ihenyen: Great!

Niran(Moderator): we’ll pick just 3 questions from the pool and then @SenatorIhenyen will answer them.

🔔 Community Q&A 🔔

💡 Community Question: One of the “promises” of our cypherpunk crypto future was that we wouldn’t need the banks anymore — or centralized institutions like CEX. Maybe this path is more painful, but ultimately faster at incentivizing crypto adoption.

If “banks” and “exchanges” are not used, does the bill prevent crypto usage in any other way?

⚡️Senator Ihenyen: Ideally, crypto isn’t supposed to need the banks or any centralized body or institution in the first place. The temporary bitter-sweet romance between crypto and the banks and other centralized bodies could be seen as a necessary step in the evolution of crypto innovations. It was never going to be easy moving completely from a centralized economy to a decentralized one. Apart from massive infrastructure and technology, such a transition needs massive education and capacity building, which is a thing I think we are not doing very well at the moment. Telling people that they are now their own banks isn’t enough. We must have projects that make it easy to use crypto solutions. Many of the DEX solutions today are quite complex and not easily accessible to the average Internet user. We will need to make DEX solutions simpler and also have great UI and UX designs. Then we must have self-regulatory mechanisms built into these DEX solutions in order to prevent or minimize scams and fraud in DEX. A Chainalysis report reveals that DEX experienced the highest level of scam in 2020 and this is expected to increase in 2021 due to increasing decentralization.

💡 Community Question: Senator what is the way forward on the Crypto ban since the CBN governor has been invited to the senate, I hope you would explain your siban plans to him.

⚡️Senator Ihenyen: Through one of our affiliate bodies, SiBAN will be making a representation to the Joint Committee set up by the Senate to look into the CBN matter. Since 5 February, we have been working round the clock to ensure that we represent the best interest of the industry. Presently, we have the following:

1. A document has been prepared and under review which will be submitted to the Joint Committee hearing this matter. In this document, we have shown to the lawmakers and regulators what the better regulatory approach should be: a risk-based approach that does not stifle innovation.
2. In order to address the threats and risks the CBN mentioned in its letter, we have completed a 15-page data-based work to show that Nigeria is presently one of the safest crypto markets in the world, with the least use of cryptocurrencies for money laundering, terrorism, and Ponzi schemes.
3. We have launched a positive PR campaign for crypto, engaging in TV interviews, radio talks, newspaper write-ups, ensuring that we are giving the members of the public the right information about cryptocurrencies. This campaign will continue for a few months.
4. We have secured the invitation by the Joint Committee to be one of those to appear to enforce it in order to state our case.

💡 Community Question: Do we expect to see a direct peer-to-peer utilization of crypto in Nigeria in the near future, should CBN upholds the ban. And if that happens, will that be the end of the Naira?

⚡️Senator Ihenyen: With the CBN ban of the crypto industry from the traditional banking and financial system, some exchanges have already started investing resources in building P2P solutions while a few others are working on a Naira stable coins backed by other stablecoins and cryptocurrencies. We expect to see more of this P2P and stablecoin adoption as the alternative to the direct use of the Naira for crypto transactions. Whatever it is you wish to adopt, it is advisable to always seek professional advice in order to understand any legal and regulatory implications.

Secondly, If P2P platforms and stablecoins become entrenched especially without any regulation or supervision, it is difficult to see how the Naira will not further lose its value. This is why we still think that rather than drive crypto adoption underground, the CBN should have considered a regulatory approach that will bring it mainstream, ensuring that the national economy benefits from the increasing adoption of crypto assets in Nigeria.

Lastly, While there are not enough local businesses that accept crypto purchases yet, the CBN crypto ban will incentivize this no doubt. Already, crypto payments for merchant solutions have started generating unusual interest in the last 7 days. Before now, many crypto users never bothered. But now they do. Not everyone feels at home with the P2P conversion of crypto to fiat, sometimes even for security and privacy reasons. So they prefer to spend money directly. I think platforms that provide crypto payments for merchants should loud it! Also, there are amazing solutions that enable anyone who receives crypto to be able to “freeze” the value in order to protect the value received from volatility. Such solutions will greatly see an increase in adoption too. All in all, the CBN ban may be bad, but it is a reminder to crypto innovators to perhaps get back to the basics.

Niran(Moderator):I know there are more questions our community members want to ask.

Do you mind taking them?

Senator Ihenyen:I don’t mind.

💡 Community Question: Does the new ruling do anything to prevent a business from stable coin adoption? Users from using crypto services? Could an individual use a service like LocalCrypto to buy crypto with fiat?

⚡️Senator Ihenyen: “Stablecoin’’, from my findings, can be such an errand word, from a regulatory point of view. They can mean many things. Because a stablecoin could be backed by a fiat currency, other cryptocurrencies, an asset, a commodity, or even a money policy-based algorithm, a particular stablecoin may be different from another stablecoin.

So in answering your question, it is good to note that the CBN or any central or reserve bank for example is not supposed to have the regulatory authority over all stablecoins but those stablecoins that are backed by fiat currencies OR cryptocurrencies considered to be money or have monetary value. Any stablecoin outside these two will most likely fall under the regulatory authority of SEC or the commodities exchange authority in your home country. Therefore, before any platform adopts stable coins as an alternative solution, please seek professional legal advice.

💡 Community Question: Some argue that it’s illegal for the CBN to make such a policy, what actions can SiBAN and other crypto associations do to get justice for investors?

⚡️Senator Ihenyen: The CBN has the statutory authority to deny a person or group of persons access to banking or financial services for certain reasons, but I have raised the question of whether the law allows the CBN to do so through a blanket denial of an entire industry from enjoying banking and financial services. In other advanced jurisdictions, this is a legislative question, not a regulatory one, except the law has declared crypto trading and exchange services illegal or criminal. We should continue to ask these questions. Who knows? We may find helpful answers.

Niran(Moderator): It’s been an exciting evening with you Senator Ihenyen. Thank you for sharing your evening with the Beam Africa Community.

We’ll end this AMA here. We hope you guys enjoyed this AMA! We have some high-quality projects joining us soon so keep an eye out! Also, don’t forget to thank @SenatorIhenyen for taking time out of his busy schedule, especially for our Beam Africa community. We hope you guys enjoyed this AMA! We have some high-quality projects joining us soon so keep an eye out!

To stay up to date with all things SIBAN

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SIBAN official website: https://siban.org.ng/

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