Nigeria Set to Prohibit Peer-to-Peer Cryptocurrency Transactions

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The administration under former President Bola Tinubu had previously reversed a ban on cryptocurrency dealings prior to a sudden change in the regulatory environment.

Nigeria is on the brink of outlawing peer-to-peer (P2P) cryptocurrency trading, referencing concerns for national security, as reported on

May 3 by TechCabal

. This forthcoming policy follows a declaration by the National Security Adviser (NSA) that crypto trading poses a security threat.

A number of prominent fintech firms, including Moniepoint, Paga, and Palmpay, are now compelled by the government to halt any cryptocurrency-related account activities.

Additionally, these companies are under instruction to report cryptocurrency transactions to legal authorities.

According to Tosin Eniolorunda, the CEO of Moniepoint, this requirement stems directly from the NSA’s classification of cryptocurrency trading as a concern for national security, which will trigger a new mandate prohibiting P2P cryptocurrency trading.

Regulatory Contrast

This approach signifies a dramatic reversal from Tinubu administration’s initially permissive attitude towards digital currencies. As recent as December 2023, the Central Bank of Nigeria

rescinded

a two-year prohibition on cryptocurrency operations and started collaborative talks with cryptocurrency exchanges about potential licensing.

Previously offered regulatory freedoms starkly contrast the current stringent regulations, with officials recently attributing a role to crypto traders in the fluctuations of the foreign exchange market.

The Central Bank has raised alarms about the potential for cryptocurrency traders to conduct ‘pump-and-dump’ schemes that may disrupt the value of the Nigerian naira.

In February 2024, the Central Bank Governor, Olayemi Cardoso,

pointed fingers

at Binance for reportedly facilitating transactions worth $26 billion that could not be traced, leading to significant policy implementations, including stringent actions against Binance and the freezing of numerous bank accounts connected to P2P cryptocurrency dealings.

Broader Impact on Financial Ecosystem

The regulatory repercussions are extending to the larger financial sector, with fintech entities like Kuda Bank, Moniepoint, OPay, and Palmpay suspending account registrations for new clients in response to instructions from the Central Bank.

This is in line with an overarching campaign that commenced shortly after the Economic and Financial Crimes Commission (EFCC)

impeded access to 1,146 bank accounts

due to illicit foreign exchange activities.

The cryptocurrency sector has responded with notable disquietude regarding these stringent regulations. A community participant expressed dismay over the government’s indifference to the adverse effects of such policies.