Regulation
Nigeria’s $59 billion crypto industry collapses under government regulations
The Nigerian government has continued its crackdown on cryptocurrencies in the country after the Securities and Exchange Commission revealed plans to delist the Naira from peer-to-peer platforms in a bid to combat currency manipulation.
- The commission’s director general, Emomotimi Agama, issued the guidelines after meeting with stakeholders in the Nigerian blockchain industry, stressing that more regulations would follow in the coming weeks.
- These regulations aim to create a monitored ecosystem for cryptocurrency dealers in the country, with the aim of restoring integrity and stability to a business teeming with tax evaders and financial criminals.
- According to Nigerian media, some Fintechs monitored by security agencies – like Kuda and Moniepoint – are giving cryptos a wide berth to escape the regulatory storm that security agencies and the Central Bank of Nigeria (CBN) have recently invoked in the financial sector. .
“It’s one of the things we have to do to save this space. Delisting the naira from P2P platforms to avoid the level of manipulation that is currently occurring. I hope for your cooperation in resolving this issue as we roll out regulations in the coming days,” said Emomotimi Agama.
Ray Youssef, head of one of the crypto companies in Nigeria, told the country’s media that peer-to-peer commerce was worth almost US$500 billion in the country. However, official reports indicate that every year, Nigerians trade $59 billion worth of cryptocurrencies.
Despite the lifting of the ban on cryptocurrencies in December 2023, the Nigerian government remains determined to allow this highly deregulated market to persist. Since that time, a series of regulations have been passed to crack down on financial activities within the sector – measures that some experts have considered too punitive, even for legitimate traders.
The war on crypto took a surprising turn in February when the country’s federal government blocked Binance’s website in the country and subsequently put the company’s top executives on trial for tax evasion and fraud. The CBN cited the world’s largest crypto traders as a loophole in the country’s financial sector, saying about US$26 billion had been illegally funneled out of the country through the platform.
With the Naira lagging behind the dollar by a thousandth, the Nigerian government has blamed crypto traders and associated Fintechs – some of whom have been banned from opening new accounts – of causing the currency’s depreciation through a series of forex manipulation strategies such as the pump and dump strategy.
In speculative trading, the pump and dump strategy involves a group of malicious investors artificially inflating the value of assets such as cryptos or stocks. This can be done by misleading the public by increasing the value to attract more investors.
However, the real value of the asset is still significantly lower than the hype dictates. Once many investors are involved, the price of the asset rises and the initial investors sell their assets at a profit. Later, it is discovered that the company was a sham and a multitude of losses ensue.
This market activity can cause currency volatility due to increased uncertainties, lucrative price increases that seem surreal, and too-good-to-be-true prospects that hot assets promise.
However, some traders in the country have mentioned that the country’s economic situation presents a deeper problem that cannot be entirely blamed on the deregulated financial sector.
See also: