As far as technologies go, blockchain and cryptocurrency are relatively new. Bitcoin which is regarded as the first and most popular cryptocurrency was only introduced in a whitepaper in 2008. You can probably still remember the first time you heard about Bitcoin. Since then, its popularity has grown in leaps and bounds. In the past year or two the demand for Bitcoin has practically “gone to the moon” measured also in the fact that ordinary people now follow developments in this area. Which is why in the past few months, one of the burning issues on the internet, has been the issue of government response to the growth of cryptocurrency.
Unlike most technology advancements, cryptocurrency directly impacts and disrupts the government in an area that has been under their exclusive control for a very long time; that is the subject of money. Put differently, world leaders have always controlled the degree as well as value of the fiat currencies in circulation in their countries through their national banks. Blockchain technology upon which cryptocurrencies are based has turned this around by its decentralised nature.
In the context of blockchain, decentralisation refers to the equitable distribution of a database across multiple participants, each of whom has a complete copy of the blockchain. Decentralisation’s major feature is, in theory, this. We have a common database with the whole history of money transfers, user account numbers, and other information that is saved on millions of PC systems that are constantly synchronized with each other, rather than on a single server. All transactions are transparent and recorded but for various good reasons, cannot be singled-handedly altered, modified or controlled by any one person.
A central or national bank is no longer required because Bitcoin, the currency, can be produced by anyone running a full node. Peer-to-peer transfers between two parties on Bitcoin’s network means that intermediaries are no longer required to manage and distribute currency. It is this principle of decentralisation that has made Bitcoin the safest, most reliable and sought-after cryptocurrency on the market. And like most other progressive advancements, blockchain technology has become subject to strong regulations and sometimes downright hostility by governments and regulators. Just a few weeks ago, the Chinese government declared cryptocurrency transactions to be illegal and banned.
The general and most popular reason presented by these countries and governments is that cryptocurrencies and Bitcoin are unstable investment vehicles and pose dangers to citizens and their economic well-being. While it is their responsibility to care, it will take a lot for me to believe that this is sincere especially as they don’t really mind if banks screw over their citizens all the time.
Another excuse of course is that cryptocurrency is being utilized by criminals and therefore should be banned. This argument falls flat when you think about the fact that the dollar has long been the de facto currency of the criminal underworld. The difference between the dollar and Bitcoin is that the Nigerian government (as well as other governments) can determine who gets what which is critical for power.
I believe the real reason for this crackdown on crypto and blockchain is that government’s fear of losing control. Cryptocurrency by its very nature of decentralisation takes away the power of control from these governments. With crypto, central banks are virtually useless as they are not needed to print money since Bitcoin, the currency, can be produced by anyone running a full node. And the government and Central Banks are not required to serve as intermediaries of trust either. With Peer-to-peer transfers and the open ledger, all transactions can be confirmed by everyone on the network. With this structure, the governments are robbed of power, control and relevance.
For instance, during the #ENDSARS protests in Nigeria, young people were unable to fully donate towards the protest through regular banking channels due to government pressure on banks and banking platforms. In a matter of hours, the aggrieved youths resorted to the use of cryptocurrency and Bitcoin, successfully ignoring the government and their antics. Such seamless transition represented the greatest fear of the Nigerian government (and a lot of other governments). In the aftermath of the protests in 2020, the government started a crackdown on cryptocurrency trading. By February 2021 it officially declared bitcoin trading illegal in Nigeria.
All the arguments by governments about the “dangers” of cryptocurrency falls on deaf ears in light of what it offers these youths; a straight shot at financial freedom and independence. In Nigeria youth unemployment stands at a whooping 33%. The minimum wage can barely meet needs. Chances of getting well paying government jobs are seriously marred by corruption and nepotism.
Today however, with a smartphone and some data, cryptocurrency offers many Nigerian youth the allure of financial freedom as straightforward as it may come. It also offers a chance to build wealth that is inflation proof. In the last five years, the Nigerian Naira has lost 30% of its value against the dollar. The inflation rate currently stands at 16.6% with food inflation at 20%. The situation might not be as dire in places such as the US, but parallels can be drawn. According to data from the Federal Reserve, millennials born between 1981 and 1996 control only 4.6% of wealth in the US. With these realities, it is no surprise that young people worldwide have embraced cryptocurrency.
For youths in developing nations like mine, the blockchain technology and crypto offers something valued even beyond financial freedom; a critical survival ingredient called hope. A hope that there is something in the future for them. Along with this hope is a sense of belonging, a formation of a new identity, and the promise of breaking out of a certain prison of birth. It Is perhaps this hope that the government seeks to control and perhaps even crush.
While regulations might come down hard, the good news is that the global crypto community sees them as just bumps in the road. In Nigeria, the youths responded with overwhelming but unsurprising resistance finding ways to circumvent the crackdown and the restrictive laws on cryptocurrency trading. Despite the government efforts to nip things in the bud here, according to Coinbase, Nigeria has the highest peer-to-peer trading adoption in the world.
A better approach might be geared towards legislation aimed at fostering the development of the cryptocurrency. Digital currencies are the future, that much is clear. These kinds of waves are unstoppable. We can battle them, but to what end and effect? We can choose to ignore them, but only at our danger and risk of missing out. If our leaders really cared, the best thing they can do here is learn to ride these crypto waves, and use them to our collective advantage.
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Cover image by Executium.