After four years of development, the Central Bank of Nigeria (CBN) will launch its digital currency project. According to reports, the launch will be held on the occasion of the country’s 61st Independence Day on October 1.
Nigeria’s Central Bank Digital Currency (CBDC) project coincides with CBN’s major anti-encryption policy and several government officials’ negative sentiment towards cryptocurrency. The digital naira also appeared when its legal currency fell to a new low, and the central bank imposed stricter foreign exchange restrictions.
The details of the eNaira project circulating in the country’s commercial banks show plans to use digital currency with strict identity verification requirements. CBN plans to introduce a hierarchical identity verification system, and each transaction has a different transaction limit.
Since CBDC is seen as the government’s response to global cryptocurrencies and privately issued stablecoins, there are concerns that more anti-cryptocurrency laws may emerge in Nigeria. In fact, once its digital currency project enters the public testing arena, China has stepped up its crackdown on cryptocurrencies.
Bitcoin (Bitcoin) The adoption rate in Nigeria continues to expand because cryptocurrency provides easier remittance tools, especially for relatives and relatives of the country’s diaspora who support returning home. Cryptocurrency also provides a means for upwardly mobile and tech-savvy young people to protect their wealth from the rapid depreciation of the naira.
CBN chooses Bitt Inc
As Cointelegraph previously reported, CBN Choose Bitt Inc, A financial technology company based in Barbados, as a technology partner for its CBDC project.According to CBN, Bitt is Development of the Eastern Caribbean Central Bank DCash The digital currency project played an important role in its decision to select the company.
In a press release issued on August 30, CBN identified Bitt’s “technical capabilities, efficiency, platform security, interoperability, and implementation experience” as one of the reasons why the Barbados technology company became the best candidate for this task one. In fact, in the eNaira project, Bitt is one of 15 companies evaluated by the central bank as a technology partner.
According to reports, all 15 companies in the evaluation process were interviewed based on standards such as anti-money laundering agreements, technical efficiency, adoption, system security architecture, and CBDC implementation experience. Cointelegraph’s survey results show that Bitt’s total score is about 82%, the highest among 15 competitors.
Bitt is also the only company with a score of approximately 80%, and one of only two companies with relevant experience in real-time CBDC operations. According to reports, this fact also affected the assessment of the sandbox stage of the assessment conducted by the assessors in accordance with the Nigerian Public Procurement Law.
CBN may seek to use Bitt’s experience in the national digital currency field and the company’s CBDC management agreement to establish its eNaira project. According to reports, Bitt has licensed its digital currency management system to CBN for use in the eNaira CBDC project.
When DCash was launched in April, Bitt CEO Brian Popelka identified a built-in interoperability protocol in the design of the Eastern Caribbean CBDC. These features may play a key role in the central bank’s efforts to facilitate easier remittance flows for Nigerians using eNaira digital currency.
Proposed eNaira business
While announcing Bitt as the technology partner of the eNaira project, CBN emphasized the “unambiguous” global CBDC trend among central banks. In fact, issues related to sovereign digital currencies are now commonplace among central banks, and some countries are already conducting pilot studies on CBDC.
According to reports, in late August, CBN sent a 57-page promotional document to the country’s commercial banks detailing the proposed operating model of the eNaira project. According to a copy of the draft guidelines seen by Cointelegraph, Nigeria’s CBDC is called the “Giant Project”. Intended as a supplementary form The legal tender of national laws. Therefore, eNaira will maintain its value parity with the Naira, but will serve as a non-interest-bearing CBDC.
As far as eNaira’s operating model is concerned, according to reports, CBN proposed a layered structure of CBDC, with the central bank at the top of the pyramid, providing services to financial institutions and government agencies, which in turn provide digital currencies to merchants and government agencies. Retail consumers. According to the draft guidelines, CBN is seeking to provide services to Nigerians with and without bank accounts.
According to reports, at least one-third of the adult population in Nigeria No bank account, June 2018 with CBN estimate Bring this figure closer to 37%. Of the more than 47 million verified bank account holders in Nigeria, only one-third are reported to be active in bank transactions, which may indicate that most of the addressable market in the country still lacks bank accounts to a large extent.
Although CBN seems to be keen to expand the country’s financial access through the eNaira project, CBDC will adopt a hierarchical authentication model, with transaction limits attached to each transaction. According to sensitive documents, Tier 1 (no bank account) must provide a nationally-identified phone number and other identification documents to qualify.
As previously reported by Cointelegraph, the daily transaction limit for Tier 1 is 50,000 naira ($120). Existing bank account holders will belong to Tier 2 and Tier 3, the difference being the degree of their identity verification process.
The daily transaction limits for the second and third levels are 200,000 naira (487 US dollars) and 1 million naira (2,438 US dollars), respectively. In addition to Tier 3, there are merchants with similar daily limits, but it is reported that entities in this group have no limit on the amount of eNaira that can be withdrawn from their bank accounts each day.
CBN’s encryption ban
In February, CBN banned banks and other financial institutions Provide services to the country’s cryptocurrency exchangesTherefore, cryptocurrency traders in Nigeria cannot fund trading accounts from their banks.
At the time, the central bank clarified that the move was not intended to prohibit cryptocurrency transactions in Nigeria, but to prevent the flow of cryptocurrencies in the country’s banking industry.In subsequent Senate hearings after the event, some lawmakers agreed with CBN’s position, saying Bitcoin makes Naira almost useless.
Since the ban was issued, several commentators in the field of cryptocurrencies and the broader financial technology field have argued that the ban has done more harm than good. As CBN begins to launch its CBDC, there are concerns that stricter anti-encryption policies may emerge.
In a conversation with Cointelegraph, Chiagozie Iwu, CEO of Nigerian cryptocurrency trading platform Naijacrypto, stated that stricter anti-encryption laws may emerge, noting:
“Yes, we expect CBN to support more anti-encryption policies because it is clear that it sees encryption as an obstacle to its monetary policy goals, although the data confirms this is a fallacy. Every crypto company in Nigeria should innovate in Restrict the method of working within the system, and consider changes in jurisdiction.”
Concerns about a possible cryptocurrency blow seem to depend on Nigeria’s potential to follow in China’s footsteps and restrict cryptocurrencies after its own CBDC. In fact, CBN has previously emphasized that the policies formulated by the Chinese and Indian authorities are the reason for its anti-crypto stance.
For Iwu, Nigeria’s crypto community must turn to judicial independence to prevent falling into restrictive government policies. “Encryption is inherently decentralized, and a more decentralized approach to using blockchain innovation should be the main driving force,” Iwu added.