Crypto Gets Blamed for a Real-Life Currency Crisis | Hacker News Reader

Crypto Gets Blamed for a Real-Life Currency Crisis

wsj.com

25 pointsimpish920814 comments

It seems from this article that the Nigerian government tried to implement currency controls to prevent capital flight because their currency (NGN) was under pressure given a very high inflation rate, so a sizeable chunk of people took to buying stablecoins so they would have an asset that was not depreciating, giving Nigeria a very high penetration of crypto (second only to India globally).

Because the government had put in place currency controls, the real exchange rate was artificially high (because there was in effect a throttle on NGN supply in the official FX market) but the stablecoin rate reflected a market clearing price based on the real supply which was therefore much lower. Rather than fixing the fundamental problem (the causes of inflation) the government has decided to arrest a couple of poor employees of Binance.

It's easy to hate on crypto and goodness knows I'm no fan of Binance, but it's really hard to see either crypto or Binance as to blame here.

> second only to India globally

Do you have a source for this? I thought Argentina and other extremely high inflation countries had much higher crypto penetration.

Also, isn't crypto pretty much banned in India?

Chainalysis' "2023 Global Crypto Adoption Index" lists Nigeria as second to India overall

https://www.chainalysis.com/blog/2023-global-crypto-adoption...

The average population doesn't care about a solution to inflation. They will vote for quick hacks like price ceilings, which are especially popular in the form of rent control.

Also, whenever there is inflation, the average voter blames the most prominent politician currently in charge as if he was centrally planning the economy.

The current situation is an indirect expression of what voters believe about inflation. An inflation free currency would require paying for liquidity and god forbid paying for services you personally benefit from. That would be socialism, right?

So Nigeria has been destroying its currency. Shockingly, some people didn't actually want the little savings they had completely annihilated, and they weren't allowed to buy actual US dollars, so they bought stablecoins pegged to US dollars. I'm mostly anti-crypto but this is the exact situation where it provides a benefit. The government has garbage monetary policy which it enforces by trampling on peoples rights, all in the service of transferring wealth from the poor to the rich. Stablecoin access can't fix all of that, but it's better than nothing.

Not to excuse incompetent leadership, of which we have a lot in Nigeria. However, for more context, Nigeria allows its citizens to have domiciliary (foreign currency - USD, EUR, GBP, etc.) accounts locally. You can/could walk up to the numerous bureau de change operators (approximately 5000 licensed ones until last week - reduced to around 1000) and buy USD with your naira at whatever the real market rate was (not the official rate) and go deposit it in your dollar account. These accounts are part of the SWIFT banking network, and you can send and receive FCY globally. The crypto issue arose from P2P trading platforms manipulating the rates through ads on said platforms without any intention to honour those prices but typically set up to drive the market towards a particular price point. This began a cycle, and within a few weeks, the currency lost 40% of its value. There was a local news article about this manipulation. I don’t think any government would fold its hands in such circumstances.

Maybe I was too quick to jump to conclusions, but honestly I am extremely skeptical of that explanation. Governments always want to blame speculators (see also CEOs and share price drops) but nine times out of ten it's because the price was too high in the first place (see also Soros and GBP in 1992).

Speculative attacks are the result of not charging for liquidity. It's kind of like renting out an apartment for free. Why complain about squatters if you are letting them in for free? If you charged for liquidity all the squatters would be gone and you wouldn't be surprised by sudden changes in vacancy rates as squatters move to a different city.

But "logic" dictates that no such fee must be allowed to be charged. After all, think of all the poor poor people who would no longer be in debt, they might have to pay a miniscule portion of it! Can't have that.

Was the government not manipulating the price of the currency to be artificially high? It sounded like the crypto allowed the price of the currency to fall to its actual value.

They weren't allowed to buy USD except at a regulated exchange rate, and the banks complied. They weren't allowed to buy stablecoins either with the same restrictions, but Coinbase ignored the rules. Breaking the law does not represent a unique benefit of cryptocurrency.

But letting the people buy a stable asset that still protect them from inflation is. Maybe I'm wrong, but if they could but it from the bank too, why did they choose cryptocurrency way? I'm sure they had a rational explanation.

(disclaimer: I didn't read TFA because of the paywall)

Because by breaking the law, Coinbase was able to offer a better deal. https://www.quora.com/What-are-the-apps-that-offer-U-S-A-vir...

Corrupt leaders complain nobody wants to use their garbage currency that they themselves ruined with poor governance, blames everyone but themselves.

Why do we even give these criminals airtime.

This appears to be the same article, syndicated to msn and therefore (for me) not behind a paywall. https://www.msn.com/en-us/news/world/crypto-gets-blamed-for-...

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