Nigerian payment system needs upgrade to blockchain – Convexity COO

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Nigerian payment system needs upgrade to blockchain – Convexity COO

Mr Adedeji Owonibi is a techpreneur, blockchain solutions advocate, digital assets investor and Founder/Chief Operating Officer of Convexity. In this interview with FELIX OLOYEDE, he speaks on how blockchain can be used to solve some of the challenges currently facing the country’s payment system

What are the lessons investors should learn for FTX and BlockFi collapse?

Investors should be aware that any exchange that they want to trade in should be regulated in the jurisdiction where they operate. For example, FTX US is currently going through liquidation issues in the US. It is going through a bankruptcy filing and all that order. So, what is going to happen is that at the end of filing, the people that will be refunded with any amount, in real terms, are account holders in FTX US. Therefore, leaving people in FTX International like people from Nigeria dry. I know people that have lost $400,000, $500,000 and $1m in FTX. Nobody is going to refund them, because the US regulation goes not cover them. Only US citizens who are trading on FTX US that would be refunded. So, they should trade on exchanges that are regulated. And the question would be is any exchange regulated in Nigeria? No as of this moment. So, Nigerians should stay away from a crypto investment if they cannot afford to lose their money because if they lose there is nobody to call on.

Visa and Mastercard have halted their move into the crypto space following the collapse of FTX and BlockFi. What does this imply?

It implies a bearish sentiment. Those are two key players in the global financial sector. They are trying to halt progress in some of the partnerships they are doing with crypto because of uncertainty. Just this morning (March 8), Silvergate Bank, a major financial service provider to the crypto sector in the US, collapsed in the US through voluntary liquidation. This is in anticipation of the very stringent regulation that is coming. And everybody is cutting deals until they are certain about the regulations they will deal with in the crypto space.

The crypto market witnessed a bearish run leading to a 46 per cent drop in revenue last year. What was responsible for this?

It is just a normal cycle. We have the bear cycle and the bull cycle. We are coming from the bull cycle of 2020. There is what we call the monetary policy of Bitcoin, which reduces supply by half every four years. The halving happens every four years. It happened in 2020. The next one is going to happen in 2024. Normally when that happens is followed by a bullish run, meaning there is skyrocketed movement in most prices of digital assets. So, what happened in 2020, 2021 and 2022 was natural for anyone to panic that they would go into a bearish cycle. And that can take over 18 months or more. We have yet to come out of it. We are still struggling with that until maybe sometime in 2024 when another cycle will come up. So, it was just a matter of trends and cycles.

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What is your outlook for the market this year?

This year is very dicey. People are not sure of what the atmosphere looks like. Everyone just struggling to understand what is going to happen. The bearish sentiment, in my view, may continue. People are still wondering where the direction is going. What is going to happen? And just like what happened with Mastercard and Visa, people will take some time to slow down on anything crypto. With those collapses, many things have happened. So, there is a whole lot that people would be looking out for.

For me, following the collapse we have and some resilience we have seen in 2023 with Bitcoin and Ethereum. This year, Bitcoin has risen to over $24,000 and Ethereum to around $1,006. So, since Bitcoin started that year around $17,000 and $1,002 for Ethereum. Both of them have gained so fast this year. So, I think that many think will pick off eventually at the end of the day. It is a period of capital outflow from the market since April last year. So, we see investors returning to Ethereum and Bitcoin because of the rise we have seen. This year we have seen the injection of over $4.5bn monthly into the market since February. For the first in a year, we are seeing more money going into these two top cryptocurrencies, which is indicating a return of investor confidence.

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Recently, Citi Group said the crypto market has decoupled itself from the stock market, meaning that as the stock market is going down, the crypto is going down also. But they are now having different lives of their own. So, this is a very good one for people who want to be on the edge to move into the move into crypto space. So, the crypto market is a bit stabilizing, but investors have to pay close attention to things that can lead to capital inflow and outflow out of the market and follow closely macroeconomic trends like interest hikes, Reserve Bank announcements, and other things that can cause volatility in the market.

$5.9bn was lost to crypto scams globally with Nigeria being among the top three countries in Africa that lost the most. What can be done to reduce global crypto scams?

People must avoid freebies. We like outrageous returns. We like miracle investments. Those were the things that were mentioned in the cryptocurrency scam that took place recently. Nigerians should know that anything too good to be true is not. For example, someone called me recently, someone called me online that they were going to organise one conference in Eko Hotel, where investors and big banks would come, promising to give me a speaking slot to talk about my products. But I will need to pay $25,000. I said I was not interested. I am not looking for investments. If I am looking for investments, I would be the one to go there. So, we have to be contented and for anything that looks too good to be true, we should just abandon it. Let’s work hard for our earnings and the Nigerian mentality of free things and money doubling.

There have been a lot of complaints about the failure of BVAS in the just concluded presidential election. What role can blockchain play in ensuring credible elections in Nigeria?

The immutability of blockchain is the reason we should be looking at blockchain because we have serious trust issues in this country. Blockchain is the only trusted technology in the world today is blockchain. It is called the truth machine. It is easy for you to put something in blockchain and ensure that nobody can change it is the interesting thing about blockchain technology. So, that is what we should be looking at. Anything that you put on the blockchain is visible and nobody can come and change it. So, I think if we want to change the narrative about our elections, we must adopt blockchain technology for our elections. To rig an election with blockchain, you have to hold everybody in the country hostage. To change results means you need to compromise all of us that have voted. INEC is currently using traditional technologies, where people can embark, update, delete and input. That is why people are complaining. With blockchain, you cannot embark, update and delete, but you can only input. Anything you have there will forever be there.

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What does the current naira crisis say about our digital banking platforms?

The digital banking platforms have not been stress-tested. You can see that everybody has migrated to the digital payment platform the whole is having problems. It is like a situation where you have a door that only five people go through and you now have 1,000 people trying to go through the same door at the same time. That is what we are witnessing today because everybody moved online and they can’t absorb the traffic. Our payment system needs a lot of upgrades. It needs to be upgraded to the blockchain. The NIBSS needs an upgrade to blockchain so that all the banks can transfer their loads with ease and it will be easy to do reconciliations among them.

People believe the naira crisis is a blessing to fintech. What is your take on this?

It is supposed to be a blessing to fintech. But again, all of them have one central point of connectivity which is NIBSS. Everybody doing financial transactions in Nigeria still connects to NIBSS. Whether fintech uses one million solutions, they still going the NIBSS gateway to be able to carry out transactions. There is still only one central gateway for financial transactions, which is the Nigerian Interbank Settlement System. And using that traditional technology for payment systems will not work. They have to migrate to a decentralised ledger technology to be able to handle the quantum of traffic that is coming through the system.

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