Like MMM, Like Bitcoin
It is an Igbo adage that says the sickness that will claim the dog will not allow it to perceive the smell of food.
That was the case with the popular ponzi scheme, MMM last year.
Depsite warnings and persuasions from financial experts and authorities alike, many Nigerians, propelled by greed, plunged their life savings into the scheme and lost an estimated 3 billion naira when the platform disappeared by the end of 2016.
By this time last year, many Nigerians were still reeling with the painful loss of their savings from the ponzi scheme.
Yet, something greater than MMM is here. And although the warnings are also there, the pull seems even stronger.
Once bitten twice shy, you may say but not with Bitcoin.
Nigerians are latching onto the digital currency in a crazier fashion than they even did with MMM.
As at the end of January, Nigerians are said to constitute the highest investors in Bitcoin in Africa, a practical demonstration of how strong our appetite for quick returns could get.
Cryptocurrencies have been trailed with controversies across the world. But it appears, the more financial authorities tried to call it a bad name, the more popular it becomes.
Whatever is fueling it, no one can say for sure.
The debate as to whether it is a ponzi scheme, pyramid scheme or financial technology has been ongoing. Global lender, World Bank called it a ponzi scheme a few weeks ago.
Other global lenders such as Bank of America, Citigroup, JP Morgan Chase, and even payment processor, Mastercard have distanced themselves from the technology.
Social media giant, Facebook had also taken a swipe at the digital currency, banning all ads related to it on its platform.
At the home front, both the Central Bank of Nigeria, CBN and Securities and Exchange Commission, SEC have repeatedly warned Nigerians to stay away from the technology.
But its popularity continues to soar, prompting the Nigerian senate to order a crackdown on traders recently.
The highly volatile currency rose to about 20,000 dollars in December 2017 but has since dropped to less than $10,000 by mid-February.
There are several reasons why this is a greater disaster waiting to happen in Nigeria.
First, no one truly understand cryptocurrencies or Bitcoin per se. If you ask a so-called IT expert or Bitcoin trader, he talks about blockchain technology and other even more confusing technical mumbo jumbo.
And one would have thought that the first rule of investing was to put your money in an investment you understand.
But who cares in Nigeria? When the dollars flow in, it wouldn’t matter if you understood it or not.
For most Nigerian investors, the pull is that they would reap healthy returns in dollars, a major attraction for those hedging against weak local currency, the naira.
But therein lies the problem, since investment is made in hard currency, it means the loss would be greater when volatility comes and the value of Bitcoin plunges.
More so, the so-called traders are advertising initial coin offering, persuading even market women that it is the smartest and fastest way to earn a lot of money.
But the promoters would be hesitant to also disclose that the entire value of the investment could be wiped out in a matter of seconds when the value plunges or that it is prone to massive theft.
This is why, the authorities must do more than issue warnings in a press statement.
The CBN must work closely with banks and investment houses to ensure that promoters of digital currencies are prevented from causing financial losses to unsuspecting investors.
As the promoters are advertising their offerings, the authorities must go beyond official warnings and launch a counter publicity campaign against cryptocurrencies, until at least there is a clear direction for dealing with technology in the global financial market.
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