Nigeria starts large-scale experiment with digital currency

Nigeria is launching this week with the eNaira a New digital currency, which is issued by the central bank. This puts the country at the forefront of the new trend of central bank digital money. With this digital currency, the central bank is trying to offer an alternative to cryptocurrencies, which are very popular in the African country. The new currency works through a kind of wallet, which people can use to make payments among themselves. The eNaira is redeemable with the Naira, Nigeria's regular currency. Initially, only people with a bank account will have access to this new technology. Later, anyone with an identity card should also be able to apply for an account with the central bank.

"The eNaira is a major step forward in the evolution of money and the Central Bank of Nigeria is determined to ensure that the eNaira is accessible to all", the central bank writes in a statement. In recent months, the authorities in Nigeria have tried to ban the use of Bitcoin and other cryptocurrencies as they pose a threat to the existing monetary system. Nigeria's population is relatively young and is already taking full advantage of the opportunities offered by virtual currencies to circumvent a sluggish banking system and capital controls.

Flight to crypto

Despite a ban on virtual currencies, which has been in place since February, cryptocurrencies remain a popular form of payment in Nigeria. According to figures from Chainalysis, which maps transactions on the blockchain, the African country is currently in sixth place in the ranking of countries where cryptocurrencies are most widely used. Because the central bank bans the use of cryptocurrencies, the trade in virtual currencies has gone underground. People use apps like Whatsapp and Telegram to trade crypto coins, making enforcement and oversight virtually impossible.

Central banks around the world are trying to roll out their own digital currencies to stop a flight out of currencies and into cryptocurrencies. Several countries are expected to launch such coins in the coming years. The central bank digital money works just like cryptocurrencies via a wallet, but behind the scenes, the differences could not be greater. Whereas digital central bank money is fully controlled by the central bank, virtual currencies are virtually impossible to regulate. Like gold, it is a form of sovereign money, with the difference that gold is tangible and also lies in the vaults of central banks. As a result, central banks have a different relationship with gold than with cryptocurrencies.

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This contribution was made from Geotrendlines 

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