Cryptocurrencies are digital assets that function on the block chain, the block chain ensures for its transparency. Cryptocurrencies before recent has been compared to all sort of ill manner wealth creation scheme, from Ponzi scheme to pyramid scheme, at one certain point it was referred to as a bubble just like the housing market bubble burst of 2008, however cryptocurrency adoption in Nigeria has increased tremendously in the past few years and a lot of exchange platforms emerged as a result of cryptocurrency adoption in Nigeria despite the ban placed on cryptocurrency by the Central Bank of Nigeria. The Nigerian youthful population has been a major factor why bitcoin and other cryptocurrencies seem to have thrived in the country due to a high percentage of unemployed youths who are eager to try out every means to attain financial independence without minding the risk involved.
Impact of cryptocurrency on financial systems
Cryptocurrencies are gradually changing the global financial system and Nigeria is not left out as entrepreneurs result to cryptocurrencies in facilitating international transactions. Although traditional banks are hesitant in adopting cryptocurrency worldwide as they believe that the inherent risk out weighs the potential benefits. However, the impact of cryptocurrencies on the financial system is glaring as central banks now issue their own digital currency for fear of traditional currencies becoming obsolete.
Although the paper money is still widely in use in most countries, but experts predicts that in no time it’s use will shrink to the bare minimum as digital currencies are gradually replacing the use of physical currencies with consumers around the world transacting with cryptocurrencies and other forms of digital currencies. Today with aid of a smart phone and access to internet connection one could send money in the form of cryptocurrency to anyone across the globe, cryptocurrencies has increased the speed of domestic and cross-border transactions, reduce transaction costs, and eventually broaden access to the financial system by poor and rural households.
The adoption of cryptocurrency in Nigeria and the world at large poses a threat to the traditional banking system, although there is no replacement of traditional currencies with digital currencies in sight as some are quite skeptical about bitcoin and cryptocurrencies legitimacy, however many of the inefficiencies of the traditional financial system will be eroded in no time and traditional commercial banks will play less important role in every day finance when the central banks’ role in terms of settlement and facilitating payments across financial institutions starts eroding.