Nigeria Set to Ban Peer-to-Peer Crypto Transactions Due to Security Risks

The National Security Adviser (NSA) of Nigeria has indicated a potential classification of cryptocurrency trading as a threat to the country’s security. This move suggests a probable intensified clampdown on peer-to-peer (P2P) cryptocurrency exchanges, as reported by Nigerian news outlets and sources from CryptoSlate.

In a series of related developments, significant Nigerian fintech players—Moniepoint, Paga, and Palmpay—have started to sever accounts linked to cryptocurrency operations and collaborate with law enforcement by reporting such transactions.

Tosin Eniolorunda, the Chief Executive Officer of Moniepoint, has stated that the NSA’s forthcoming classification could lead to the establishment of regulatory prohibitions against P2P cryptocurrency trade. Official announcements on this matter are expected to be released shortly.

Such a development contrasts with the initial approach taken by the administration under Bola Tinubu, which appeared more tolerant of cryptocurrencies. The Central Bank of Nigeria, for instance, had lifted a previous two-year prohibition on cryptocurrency exchanges in December 2023, which suggested an inviting regulatory climate.

Nonetheless, a turnaround has been observed in recent times, with officials aiming their criticism at cryptocurrency speculators for their role in intensifying instability within the nation’s foreign exchange market. The anticipated interdiction of P2P exchanges stems from the belief of the Central Bank that this form of cryptocurrency trading is being used by traders to destabilize the Nigerian naira through pump-and-dump arrangements.

The Governor of the Central Bank, Olayemi Cardoso, claimed in February 2024 that the Binance exchange had been a conduit for about $26 billion in untraceable dealings, prompting stringent measures against the platform, including the freezing of more than a thousand bank accounts associated with P2P crypto exchanges.

Additionally, four leading fintech companies were instructed to stop creating new customer accounts, although the origin of this instruction is not definitively known.

Eniolorunda, representing Moniepoint, acknowledged that the NSA prompted this initiative, citing worries about the simplified process used by fintech platforms to set up new accounts, especially Tier 3 accounts, which are subject to minimal oversight.

Although details from the NSA spokesperson were limited, it is clear that there is growing concern about the proliferation of fintech-facilitated accounts, which traditional banking institutions argue may act as channels for illegal funds.

The Central Bank responded by amending its regulations in December 2023 to compel fintech companies to confirm the identities of all account holders by March 2024 thoroughly.

As new regulations loom on the horizon for the Nigerian cryptocurrency landscape, the future of P2P trading hangs in the balance, with national security considerations and an evolving regulatory framework at play.