The Breakdown - Why Bitcoin Matters for Nigeria and Iraq

Episode Date: August 15, 2021

On this week’s “Long Reads Sunday,” NLW reads: “How Crypto Can Help Nigeria’s Economy” by Olumide Adesina “The Inevitability of Crypto in Iraq” by Abdurrahman Bapir Enjoying this content?   SUBSCRIBE to the Podcast Apple:  https://podcasts.apple.com/podcast/id1438693620?at=1000lSDb Spotify: https://open.spotify.com/show/538vuul1PuorUDwgkC8JWF?si=ddSvD-HST2e_E7wgxcjtfQ Google: https://podcasts.google.com/feed/aHR0cHM6Ly9ubHdjcnlwdG8ubGlic3luLmNvbS9yc3M=   Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW “The Breakdown” is written, produced by and features NLW, with editing by Rob Mitchell and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Only in Time” by Abloom. Image credit: Golden_Brown/iStock/Getty Images Plus, modified by CoinDesk.

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. The breakdown is sponsored by Nidig and produced and distributed by CoinDesk. What's going on, guys? It is Sunday, August 15th, and that means it's time for Long Reads Sunday. And listen, we have had so much discussion of U.S. crypto and U.S. politics and North American in crypto, if not the U.S., that I thought that it would be an interesting departure to use this Longreed Sunday to read some pieces about crypto and Bitcoin in other parts of the world, what it means, why it matters, and what the future holds. So I'm actually going to read two pieces, both published

on Coin Desk this week, one focused on Nigeria and one focused on Iraq. First, let's read how crypto can help Nigeria's economy by Alamide Adesina. Alamide is a nice. Nigeria-based certified investment trader who, as you will soon see, has a lot of passion for what Bitcoin can do for his home country. Nigeria, Africa's leading crude oil exporter and largest, most populous country, has about 40% of its population living below poverty levels. The COVID-19 pandemic caused falls in the output of goods and services, which negatively affected the economy and caused thousands of jobs to be lost.

It is estimated that Nigeria's unemployment rate will reach 32.5% this year and rise even more next year. That's where Nigeria's emerging crypto economy comes in. To strengthen the development of Africa's largest economy, Nigerian regulators and stakeholders must tap into the potential inherent in crypto to improve such unimpressive economic data. We spoke to several experts from the Nigerian crypto scene to explore some of the potential benefits. Get around the ban. A crypto economy can help Nigerians who lack bank accounts deal with many of the challenges of international trade. Crypto transactions are growing rapidly in Nigeria, which already embraces the internet. The crypto ban issued by the Nigerian Central Bank, prohibiting commercial banks

and payment providers from dealing with crypto entities, is encouraging a young tech-savvy population to embrace crypto for the first time. Chartered financial analyst Temitope Boussare notes that blockchain technology allows people to conduct transactions without middlemen. Quote, cryptocurrency obviates the bureaucracies and high charges associated with bank transfers. The African economy has benefited from digital solutions for e-payments and transfers, and new players are leveraging financial technology to provide enhanced banking solutions, end quote. Anti-inflation. In an economy riddled by hyperinflation, investment in cryptocurrencies means preserving wealth.

Quote, Nigeria's crypto market boom is driven by the depleting value of the Naira, which has seen the local currency depreciate by over 100% since 2015, said Anthony Okofor, an adjunct professor of finance at the University of Louisville. Quote, in an economy mired by hyperinflation and a high unemployment rate, investment in cryptocurrencies is emerging as a leading investment outlet and a means of preserving wealth and wages." End quote. Avoiden Karepe, managing director at Afri-Invest Research, said crypto assets are becoming an easier option for many young Nigerians looking to preserve their wealth.

A large number of crypto enthusiasts have taken to digital assets as a store of value to prevent the negative impact of inflation. For context, Bitcoin in 2020 returned 302.8% while headline inflation, Nigeria's CPI stood at 15.75% year over year in December. Significant numbers of Nigerians are already feeling the negative effect of the recent ban on crypto trading, which has led people to have to go through third parties because traditional bank channels are barred from dealing with crypto transactions. The number of individuals exposed to questionable entities has increased. Still, over $400 million worth of crypto assets have been traded in Nigeria this year. Statista, a market data tracker said,

market pundits attribute that growth to the way cryptocurrency limits central banks from imposing monetary controls. Crypto also greases the economy by offering greater liquidity, helping Nigerians move money around. Cryptos have provided a sufficiently liquid fiat alternative for Naira holders looking to exit the local currency, said Ua Osidai, a senior vice president at FBN Quest Merchant Bank. Remittances. The high cost of cross-border payments has prompted Nigerians in the diaspora to send money back home using digital assets. In the first half of 2021, Nigeria led Africa's peer-to-peer trading volume reaching 205.7 million, with Paxful accounting for 77.2% of that, and local Bitcoins accounting for most of the rest, 22.8%. Quote, cross-border transfers have been

expensive and unreliable. With over 3,000 mobile money transfer platforms, only 3% can do cross-platform transfers. Crypto has been the best alternative so far for such transactions. The freedom that comes with it has also propelled adoption, said Kabi Hillary, the lead of Lunar Crush Africa, a fast-growing real-time cryptocurrency social media and politics company. Blockchain technology can further ease numerous challenges for Nigerians when it comes to international trade, especially those who do not have bank accounts, Pusari, the financial analysts said. According to the World Bank, there are about 350 million unbanked adults in sub-Saharan Africa. But crypto assets can help to increase financial inclusion, allowing for fast

and accessible transfers, which in turn stimulate economic growth and improve livelihoods. With poverty, inflation, and unemployment levels at an all-time high, made worse by the outbreak of the pandemic, cryptocurrencies have presented a different opportunity for some Africans looking for an alternative source of income and protection against the economic downturns, Carripe of Afra-Invest research said. Unemployed Nigerians can generate income using blockchain technology and cryptocurrency, as traditional jobs steadily become obsolete as a result of new technology. There are jobs available for those who can create crypto and blockchain products for businesses, develop crypto-related products, audit smart contracts, perform crypto-phorrenzyc audits, and manage projects.

Regulation needed. But crypto assets by themselves will not have an all-encompassing impact on the Nigerian economic challenges. Better regulation is needed, said Osidaya of FBN-Quest Merchant Bank. Quote, questions remain around transparency and crime prevention. My view is that these challenges are solvable, but would require regulatory interest. This approach has varied widely across countries, but I think in Nigeria's case, it might help to create a structure where the regulator has clear oversight of end-to-end crypto-based transactions. This will enable. the continued crypto user adoption and increasingly divert demand from the nation's foreign exchange reserves, he said. Still, a post-pandemic Africa must begin to develop its blockchain industry.

The technology will adapt to meet our unique Nigerian market niche, including financial inclusion. The breakdown is sponsored by Nidig, the institutional-grade platform for Bitcoin. As longtime listeners know, Nidig is a major force in the Bitcoin space, and they're now making it possible for thousands of banks who have trusted relationships with hundreds of millions of millions of customers to offer Bitcoin. That mainstream access is critical for all of us, and you can learn more about it at nidig.com slash nLW. That's nydig.com forward slash nLW. Now let's jump over to the inevitability of crypto in Iraq. It's by Abdur Rahman Bopper and was published on Coindesk earlier this week. Abder Rahman is the founder of Kurd coin, the first and largest crypto brokerage in Iraq. He's also a

master's student in politics and economics of the Middle East at King's College in London. The inevitability of crypto in Iraq. Cryptocurrency was born out of a financial crisis. It was a proposed solution to the problems caused by an inherent in a worldwide banking system as well as centralized authorities. Satoshi Nakamoto's vision, as set out in the Bitcoin white paper, was, in some ways, too good to be true at the time. The idea of a decentralized, peer-to-peer digital cash was so obscure that had it not been for an elite of tech geeks who knew the real value of this technology, it would have been dismissed. Early adoption remains slow until more people realize the promises

of crypto and its underlying blockchain technology. More than a decade after Bitcoin first appeared, adoption of the cryptocurrency shows that the technology is in the early stages of revolutionizing finance in the world, providing solutions for the unbanked and banked alike. Nor is this more on display than in Iraq, which now has, for the first time, a bridge that connects the unbanked in Iraq to the international economy in an otherwise financially disconnected part of the world. However, the widespread adoption of crypto in Iraq has come up against a host of obstacles facing both crypto users and businesses. In early 2017, when my team and I had just launched Kurdcoin as the first and only cryptocurrency brokerage in Iraq and Kurdistan region,

the number of people who knew and used cryptocurrencies was in the tens and hundreds. Community in the country has grown exponentially ever since. During the past four years, we have directly provided service to thousands of clients, and there are many Iraqi Telegram and Facebook peer-to-peer trading groups with thousands of members. The crypto-use cases have been growing as well. One of the main impediments for blockchain adoption in Iraq has been the sustained hostile attitudes of authorities towards cryptocurrencies without exceptions. During the 2017 Bull Run, the Iraqi Central Bank issued a statement prohibiting the use of cryptocurrencies, a stance that has remained unchanged to date. Similarly, earlier this year, the Ministry of the Interior of

of the Kurdistan Regional Government issued a statement warning, all foreign exchange and money transfer offices to stop brokering cryptocurrencies or they will face legal action. The outlawing of digital currencies in the absence of a coherent regulatory framework have come at a cost to both users in the local economy, as they have forced people to seek crypto investment opportunities in something of a black market with no accountability or regulatory oversight. Thousands of people have fallen victim to crypto scams, Ponzi schemes, or other forms of fraud. Tens, if not hundreds of millions of dollars of people's money have been stolen by foreign agents or companies posing as legitimate businesses who require to be paid in crypto. That has slowly drained cash from the

economy and mostly from already economically troubled regions. Less than a month ago, for instance, the website of a company calling itself Pretorian Group International or PGI disappeared, and its team ran away with north of $40 million of investors' money. It's the latest in a string of multi-million dollar Ponzi schemes that turn crypto dreams into nightmares. A vicious cycle is created in which the government banned crypto because it's used in fraud, and fraudsters manage to continue to use it because it's not regulated. The only way to break this cycle is by introducing a bill to regulate digital currencies and requiring all crypto businesses to be registered. Another limitation in Iraq is a general lack of knowledge about cryptocurrencies and blockchain

technology within both the government and wider society. At the governmental level, this lack of knowledge has led it to view cryptocurrencies in a completely negative light and mainly as a means for money laundering, fraud, and online privacy. A report by Deloitte about Iraq has underlined that concern, stating that, quote, instead of pushing the cryptocurrencies to the periphery of financial systems, the central bank and other regulators as well as market authorities must play a leading role in making them mainstream. On the societal level, the problem of general financial and crypto illiteracy means people make poor, uninformed financial and investment decisions, and are unable to use cryptocurrencies to their full potential. If cryptocurrency is ever

featured at prime time on Carter Satellite channels, the hosts and participants often show a disappointing lack of knowledge, to the point of some of them do not know the difference between a local scam coin and Bitcoin. We have tried to mitigate some of these challenges. We have tried to mitigate some of these challenges by pushing for regulation through major law firms, increasing knowledge about cryptocurrencies and spreading awareness regarding crypto scams and risks in order to create a better environment for crypto users in the country. Further, major exchanges like Binance, Crypto.com, and Coinbase to not provide services in Iraq. Despite these roadblocks, cryptocurrency use in the country has been constantly increasing. Who can deny the largely untapped market potential?

Iraq's population of more than 40 million is mostly young, with more than 60% under the age of 25. There are more than 37 million mobile cellular subscriptions, and internet penetration is above 75%. Although e-commerce, e-banking, and digital payments are still major underdeveloped sectors, many young people pay for online shopping and subscriptions with crypto. Similarly, Iraqi population is largely unbanked, with fewer than 1 in 10 adults having a bank account. Many seem to have turned to crypto as an alternative both for investment and as a store of value, because it's better and safer in several ways than storing cash up at home. Ignoring the warnings from authorities, businesses are also beginning to use

cryptocurrency for transferring money within the country and outside, and companies and wealthy individuals are adding crypto to their investment portfolios. Despite a number of challenges, mass crypto adoption in Iraq seems to be inevitable because of the financial opportunities, ease of using crypto for payments and other applications, and it is happening fast. So just a super quick recap from me, I really like these sort of voices from places around the world where cryptocurrency is doing something meaningful in their communities right now, not just theoretically in the future but right now. It is so easy when we talk about crypto to view it as strictly a phenomenon for people who are just like us when the reality is open permissionless

networks by their very nature are for everyone. And in fact, the thing that makes them so powerful, such an ahistorical force, is that they represent the ability for people around the world to opt out of local monetary regimes that do not serve them. That is unique in modern human history and something that is extraordinarily powerful. And I find it personally, incredibly important to keep my eye on that larger potentiality and what it means in real people's lives. So I hope you enjoyed this look

into what Bitcoin and Crypto mean for some other parts of the world, and I hope you're having a great weekend. Until tomorrow, guys, be safe and take care of each other. Peace.