Singaporean crypto platform raises US$18m as it expands in Nigeria

Singapore-based cryptocurrency savings and investment platform Pillow says it has raised US$18m in Series A funding following its recent expansion in Nigeria.

Pillow offers its users a return on cryptocurrencies by investing in various blockchain-enabled decentralised finance (DeFi) investment strategies. DeFi platforms allow people to lend or borrow funds from others, insure against risks, and earn interest in savings-like accounts. The start-up aims to simplify investing in this nascent and complicated industry. It has a dedicated research team that looks for the safest DeFi strategies in which to invest users’ savings, similar to how traditional money managers would pick stocks for clients. According to Pillow’s Nigerian website, users can earn up to 14% annual interest on their deposits. 

Founded in 2021, Pillow has more than 75,000 users, with India and the Philippines as its other core markets. The service has received mostly positive reviews, with a 4.5 rating on the Google Play store. However, there have been some complaints regarding difficulties in withdrawing funds in some countries, to which the team responded. According to Pillow, all assets deposited are securely stored with its custody partner, BitGo, and protected against any incidents with a US$250m insurance policy. The venture capital firms that participated in its latest investment round – Accel, Quona Capital, Elevation Capital and Jump Capital –previously backed companies such as Yoco, Wasoko and Monzo.

Africa’s cryptocurrency market increased by 1200% in the past year alone with total crypto assets estimated to be worth US$ 105.6bn. Nigeria ranks eleventh in the Chainalysis 2022 Global Crypto Adoption Index. A report by KuCoin claims more than a third of Nigerians between the ages of 18 and 60 have traded in cryptocurrencies. According to Brookings Institute Sub-Saharan Africa received at least US$48bn in inwards remittances in 2019 - half of which went to Nigeria. While most of that money is moving to Africa from Europe and North America, there’s also a large volume of remittance payments within African countries. Some 19 African countries have placed an implicit ban on cryptocurrencies prohibiting banks and other financial institutions from dealing in cryptocurrencies and banned cryptocurrency exchanges from operating. Yet the adoption of cryptocurrencies in Africa shows no sign of slowing down. That is because of there is a growing market for it. Some African governments like that of Nigeria's have implemented strict controls on how much currency can be moved across borders. In Nigeria, for example, some banks limit customers to sending as little as $500 out of the country at a time. Cryptocurrencies are, therefore, a cheap and useful alternative.

Despite the risk of severe volatility in the global cryptocurrency market many Nigerians see it as a safer option than the local currency- naira. This year, the naira hit all-time lows against the US dollar, while year-on-year inflation was over 20% in September. Most Nigerians do not use crypto for speculative purposes but rather as a quick and low-cost alternative to traditional payment options and to receive remittances. A shortage of US dollars in the country has driven some to use crypto for international business transactions.

In February 2021, the Central Bank of Nigeria barred local banks from transacting with entities dealing in cryptocurrency, sending shockwaves through the industry. Cryptocurrency trading itself, however, is not illegal in Nigeria. Banks are just not allowed to facilitate it. To overcome this hurdle, many have turned to peer-to-peer (P2P) trading - the direct exchange of cryptocurrencies between parties without the involvement of a central authority. There are numerous P2P platforms – including Paxful, Yellow Card, and Quidax – that help facilitate such transactions.

Nigeria is trying to find a middle ground between the unchecked use of cryptocurrencies and a complete ban. The national Securities and Exchange Commission (SEC) published a regulatory framework for digital assets in May 2022. Among other measures, the rules include a requirement for exchanges to have a ‘no objection’ letter from the SEC for each of the assets it trades in.

 

References

‘Nigeria's markets regulator publishes rules on crypto assets’, Reuters, 14 May 2022

‘Nigeria’s SEC affirms all digital assets are securities in new rulebook’, CoinDesk, 16 May 2022

‘Cryptocurrency usage soars in Nigeria despite bank ban’, S&P Global Market Intelligence, 09 June 2022

‘Nigerians continue to bet on crypto despite fall in value’, The Africa Report, 02 August 2022

‘The most curious nation about crypto is Nigeria, study shows’, BNN Bloomberg, 10 August 2022

‘The 2022 Global Crypto Adoption Index’, Chainalysis, 14 September 2022

‘Pillow wants to make crypto saving and investing easy for new users’, TechCrunch, 13 October 2022

‘How peer-to-peer (P2P) Bitcoin trading works in Nigeria’, Yellow Card, 17 October 2022

‘Nigeria inflation hits 17-year high of 20.8% amid soaring food prices’, Premium Times, 17 October 2022

‘Decentralized finance’, Wikipedia, Accessed 21 October 2022