Nigeria Deposit Insurance Commission (NDIC) and Central Bank of Nigeria (CBN) Set up a Committee

The use of digital currencies like Bitcoin is continuing to grow around the world and many countries are already tapping into its potential. For a country’s business to remain relevant, it must keep up with the latest technology and tools. As we enter the so-called era of ‘fintech’ (financial technology), the finances of your businesses must be reviewed as well.

According to AlhajiUmaru Ibrahim, the Managing Director, Nigeria Deposit Insurance Commission (NDIC), said the commission and the Central Bank of Nigeria, CBN had set up a committee to look into the trending “digital currency, ‘bitcoin’.

During a workshop with the theme “Economic Recession and the Nigerians Banking Sector: Opportunities, Challenges and the way Forward”.On our part, we have constituted a Committee together with the central bank to have an in-depth study of this phenomenal bitcoin.We will look at its advantages and disadvantages, what it means for the payment system and what it means for safety and security of customers.We will also look at what it means for money laundering, anti-corruption, crime and measurement of money /near money instrument for the economy.Ibrahim said ‘bitcoin’ included what is being called blockchain technology-based products in the market.He said that a lot of Nigerians had already started patronizing bitcoin, stressing that ‘it had started to creep in and nobody could stop it.He said that in Europe and the United States, it had gained currency and some of the leading banks in Europe had also adopted their own versions of bitcoins.Some of the central banks have also adopted it and are seriously doing everything possible to bring in the emergence of this invisible product.

Huge Economic Potentials of Bitcoin

While the origins of Bitcoin remain mysterious, it has grown rapidly in the last few years. Businesses choose to accept Bitcoin for many reasons, including being at the forefront of new technology, to attract customers now using Bitcoin, to lower transaction fees from credit and debit cards, and to eliminate certain kinds of fraud.

Bitcoin have the potential to affect all kinds of businesses. Perhaps your overseas suppliers are asking to be paid in Bitcoin to reduce fees associated with paying in foreign currency, or with transacting through a bank, or to reduce their tax liabilities.

Money transfer fees to Africa is one of highest in the world, bitcoin remittance has recently become one of the best used cases for the currency due to its facilitation of cross-border payment with low fees and faster transactions time. You can buy bitcoin in abroad and send it to your family in Nigeria who can instantly exchange it to Naira at nairaex – the leading bitcoin exchange in Nigeria.

According to (ECB) Bitcoin is used for around 69,000 transactions per day worldwide, compared with a total of 274 million non-cash retail payment transactions per day for the European Union alone.

The European Central Bank (ECB) cited the following disadvantages for virtual currencies: lack of transparency, clarity and continuity; dependency on IT; anonymity of the actors involved; high volatility; and lack of safeguards to protect users against these risks. Participation in virtual currencies exposes users not only to payment system risks, but other risks. Users are exposed to exchange rate risk, to counter party risk related to the anonymity of the payee, and to investment fraud risk related to a lack of transparency.

However, the ECB also noted the following virtual currencies advantages perceived by users that could challenge more traditional payment systems; transaction costs, global reach, anonymity of the payer and speed of settlement.Hence, ECB does not view virtual currencies as presenting significant risks to banking activities.

Bitcoin make transactions much cheaper and faster, as the cost of transferring bitcoins via the internet is less expensive and quicker than through conventional banking system (Tanaka, 1996). Given the borederless nature of bitcoin, international transfers are made without having to worry about expensive bank charges or exchange rates related to the transfer of fiat money (Avent, 2013). These innovations can potentially have the effect of an increase in business opportunities and the expansion of international trade (Tanaka, 1996). These advantages were acknowledged by the former Chairman of the Federal Reserve, Ben Bernanke, when he proclaimed that Bitcoin “may hold long-term promise” as a payment system (Bernanke, 2013).

From the revelation you will understand that high interest rates and other Bank charges does not help small businesses especially the manufacturing sector to grow well. But with the retention of these charges in the hands of investors in the country economic activities will increase and job created for the people when the costs of running businesses are low. Also such charges if plough back into the Business will help economic growth and development in the country. The Mckinsey report stated how roughly 95 million new jobs would be created by digitizing finance in emerging markets. Also as the number of mobile phone owners continues to rise, it becomes even more important to focus efforts on this technology. Bitcoin will play a major role in the digitization of our economy.

The Bank of England modelled an economy with a digital currency equal to 30% of GDP with a simulated digital currency that was subjected to real world business cycles.

“The results suggest a 3% annual increase to GDP. An increase of $80 billion to the United Kingdom GDP,” it shows, adding that an explanation was that the central bank’s digital currency reduced both interest rates and the cost of financial transactions.

The study found that digital currencies will give governments another tool to control inflation and interest rates. Payment and record keeping in digital currencies would be decentralized.All these would be possible with the blockchain technology that powers digital currencies like Bitcoin.

Conclusion

It is clear that Bitcoin has present, serious future hope over fiat money. Government’s monopoly of the supply and demand of fiat money has resulted in an unfriendly business culture and long-term inflation. Bitcoin could bring great benefits and innovations to the current banking and financial system if allowed and regulated in the economy. The adoption of bitcoin as a payment system will helpaddress many economic challenges that we currently face as a nation.