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How Bitcoin is Traded Peer-to-Peer on the Streets of Nigeria

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Bitcoin is Traded Peer-to-Peer

Nigeria is among the few African countries that have become hubs for cryptocurrency adoption and innovation. Presently, Nigerians’ appetite for speculating in digital currencies has led to an uptake in trading volumes on peer-to-peer exchanges with close to $5 million in bitcoin reportedly being traded each week. However, the proliferation of scams in the bitcoin space is discouraging traders and have even resulted in heavy losses for some victims. Hence, Nigerians are now forming informal trading networks to guard themselves against this menace.

The Rise of Informal Trading Networks

Typically, Nigerians have been trading on local cryptocurrency exchanges such as NairaEx and ICE3X. However, many traders are now bypassing this traditional model and are opting for informal groups where traders are taking a personal approach to trading digital currencies.

Some of these informal networks can be as simple as bitcoin trading groups on messaging apps like Telegram and WhatsApp. The group administrators are responsible for reviewing identification and banking documents for members looking for admission into these groups. Occasionally, the administrator will act as a trusted broker, holding the purchaser’s funds in escrow until the seller confirms the bitcoin transfer. This sort of intermediary can be likened to the kind of black market exchangers who prowl outside Nigeria’s high-end hotels looking to exchange sacks of crumpled weather-beaten naira notes for stacks of dollar bills.

Over the past year, such networks have blossomed across the country with varying degrees of security procedures. Some hold regular meetups at members’ homes or in social establishments where buyers can oversee bitcoin transactions in person and exchange money safely.

Using Informal Networks to Guard Against Bitcoin Scams

Bitcoin MLM and HYIPS schemes have defrauded many cryptocurrency users in African countries. According to Bashir Aminu, CEO of Lagos-based blockchain startup Cryptogene, the local scams follow a familiar pattern. The target receives a message from a purported Nigerian prince and is asked to wire local fiat currency in exchange for bitcoin. In some cases, the scammer will go the extra mile and create a trading profile on a local exchange complete with a name and photo of a real dealer. The technique known as cloning is good enough for a cursory background check.

“Everybody I know has been scammed in one way or another,” he told Bloomberg.

The scams are now evolving with fake traders flooding cryptocurrency exchanges, messaging groups and even on the streets of major cities. Occasionally, a scammer may sneak into the informal groups but once recognised, the group administrators are quick to take action and throw them out.

Trust is the backbone of these groups and anyone who breaks that principle is promptly removed from the group. Having said that, despite the prevalence of scams in the country, Nigerians will not let that interfere with them making a profit trading cryptocurrencies.

Bitcoin

South Africa’s Central Bank Categorises Cryptocurrency as “Cyber Tokens”

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South Africa Cyber Tokens

The South African Reserve Bank has made a decision to categorise virtual currencies such as bitcoin as “cyber-tokens” stating that they do not meet the necessary prerequisite to be referred to as money.

While addressing reporters in Pretoria, the Deputy Governor of the Reserve Bank of South Africa, Francois Groepe, said:

“We don’t use the term ‘cryptocurrency’ because it doesn’t meet the requirements of money in the economic sense of the stable means of exchange, a unit of measure and a stable unit of value. We prefer to use the word ‘cyber-token’.”

In addition, the Reserve Bank has now formed a financial technology (fintech) taskforce that will be tasked with reviewing the central bank’s stance on private virtual currencies and help draft a suitable regulatory regime and policy framework.

The decision by South Africa’s central bank comes just two months after the South Africa Revenue Service (SARS), announced their new laws on digital currencies putting them ahead of most African countries that are still struggling to implement laws that govern cryptocurrency use and trading.

Groepe went on to say: “We want to ensure or establish whether there is still compliance with the relevant financial surveillance or exchange-control regulations.”

Not Everyone Loves Cryptocurrencies

Many African governments have been hindering the adoption of cryptocurrencies. Just this week, the Reserve Bank of Zimbabwe banned all cryptocurrency operations in the country forcing Golix – one of the largest cryptocurrency exchange platforms in the country – to take them to court and challenge their directive. Although the ban was lifted by the Harare High Court, it is not yet clear what the next cause of action of the Reserve Bank of Zimbabwe will be.

Zimbabwe is not the only country. The Central Bank of Kenya has also maintained that investing or trading in cryptocurrencies is risky and has continued to warn both local banks and the general public against them. The central bank of Lesotho also told investors earlier in the year that they would not offer any help to anyone in case they lost their money on digital currencies.

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Zimbabwe High Court Suspends Ban on Cryptocurrencies Set by Central Bank

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Zimbabwe Court Suspends Ban on Cryptocurrencies

Zimbabwean digital currency exchange Golix will be able to resume operations after the Harare High Court suspended a ban by the Reserve Bank of Zimbabwe (RBZ) that prohibited cryptocurrency operations in the country.

Zimbabwe’s central bank had barred all financial institutions from providing any services to cryptocurrency exchanges terming their move as a step that is meant to “safeguard the integrity, safety, and soundness of the country’s financial system, and to protect the public in general”.

The ruling was made by the High Court after the Reserve Bank of Zimbabwe failed to appear in court following a case that was filed by Golix challenging the country-wide ban of cryptocurrency trading.

In an interview with CCN, Golix’s Communications Manager, Nhlalwenhle Ngwenya, said: “The ban was lifted.” None of the officials at the Reserve Bank of Zimbabwe, including the Governor, John Mangudya showed up for the proceedings at the Harare High Court causing the court to suspend the ban.

“We are hoping that we can immediately go back to doing business and processing the order book,” stated an official from Golix. As the biggest cryptocurrency exchange in the country, Golix was forced to stop its operations and find ways to deal with the directive from RBZ in a notice that was sent to its members.

Relief to Cryptocurrency Exchange Platforms

The ban lift is a relief to both crypto traders as well as investors who will now be able to trade on the Golix or Styx24 exchange platforms. Besides their crypto trading platform, Golix also owns a bitcoin ATM that is located in Harare.

The RBZ had classified operations by cryptocurrency exchanges as illegal in the country. One of the arguments presented to the high court by Golix was that the ban was unconstitutional citing Section 68 while questioning the authority the central bank had in making laws, a function which is meant for the legislative arm of the government, which the RBZ is not part of.

In a letter issued on May 15 to Golix, the central bank ordered them to cease all their cryptocurrency trading and gave banks a maximum of 60 days to stop any relationships they may have with virtual currency exchange platforms in a circular that had been issued on May 11.

The high court ruling also gave the central bank of Zimbabwe a maximum period of 10 days, within which they can oppose the provisional order. In addition, the RBZ was also ordered to pay the cost of the suit.

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Kidnappers in South Africa Demand Bitcoin Ransom for Teenager, Boy Found Unharmed

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Kidnappers Demand Bitcoin Ransom

In South Africa, a gang has kidnapped a 13-year old teenager and demanded a ransom to be paid in bitcoin for his release. The abductors have demanded a ransom of 15 BTC, which is an equivalent of $120,000 at today’s prices.

“This is a kidnapping! We have your child. Your child will not be harmed if the following demands are met: We demand a ransom of 15 bitcoins to be paid to the below Bitcoin wallet to secure your child’s safe release,” reads the note left by the kidnappers.

According to The South African, 13-year-old Katlego Mariate was kidnapped while playing with two of his friends at his home in Frangipani Street, Tasbetpark Extension 3, Witbank. Witnesses testified the victim was grabbed into a gold Toyota Corolla occupied by three unknown men before driving off.

The Police spokesman, Brigadier Leonard Hlathi, said the situation is being investigated:

“We are investigating a case of kidnapping that happened on Sunday in Witbank. There was a demand that was made that the parents should deposit cash in bitcoins.”

Another police officer said the parents of the victim, who are in deep shock over the incident, do not even know what bitcoin is. “They don’t even know what this bitcoin is. They’re devastated and you can see they’re worried and asking themselves: ‘Where’s our son?”

Boy Found Unharmed

According to Reuters Africa, police spokesman Hlathi informed the public that the boy was found unharmed on May 24.

This appears to be the first case in the country involving a bitcoin ransom in a kidnapping. However, it is not the first time this has happened in other parts of the world. Last year, a bitcoin analyst was kidnapped in Ukraine and, in early 2018, a lawyer was abducted with respective kidnappers demanding bitcoin as ransom in Mexico.

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