Regulation
P2P Crypto Ban Looming as Nigeria Calls Crypto a Security Concern
At least three Nigerian fintech startups – Moniepoint, Paga and Palmpay – will block the accounts of customers trading in cryptocurrency and report such transactions to law enforcement after Nigeria’s National Security Advisor (NSA) classified the trading cryptocurrency as a national security issue.
This designation means that new crypto regulations that will ban peer-to-peer trading of cryptocurrencies are in the works, said Tosin Eniolorunda, CEO of Moniepoint.
Another person with knowledge of the conversations told TechCabal that a regulation banning p2p trading would soon be made public.
If the ban occurs, it will represent a major regulatory change after the Bola Tinubu administration initially softened its stance on crypto. In December 2023, the Central Bank lifted a two-year ban on cryptocurrency transactions, and at least three cryptocurrency exchanges were in talks with the Securities and Exchange Commission (SEC) about licensing cryptocurrency.
Yet early successes were reversed and over the past two months, authorities have blamed the volatility of the exchange rate regime on crypto speculators.
The rationale for banning p2p trading is linked to the Central Bank’s belief that crypto traders use peer-to-peer trading to manipulate the naira via a pump and dump strategy. In February 2024, Central Bank Governor Olayemi Cardoso said $26 billion in untraceable transactions were processed by Binance.
This led to a crackdown on global exchange Binance and the freezing of more than 1,000 bank accounts involved in peer-to-peer transactions. But the authorities went even further.
Last week, TechCabal exclusively reported that four leading fintechs have been instructed to stop opening new customer accounts. At the time, it was unclear whether the directive came from the Economic and Financial Crimes Commission or the NSA. An NSA spokesperson denied any connection to the incident.
On Thursday, Tosin Eniolorunda, CEO of Moniepoint, confirmed that the NSA had ordered a pause on new customer signups.
“Customers can easily open level 3 accounts on fintech platforms in seconds,” he said at the TMT Business Law conference in Lagos.
“The NSA found a lot of accounts [that were involved in crypto trading] and blocked the accounts. They feared fintechs would be fast [in opening accounts] and told us to stop the integration.
An NSA spokesperson declined to comment.
These easy-to-open accounts, made possible by relaxed rules aimed at boosting financial inclusion, came under scrutiny last year. Traditional banks claimed that these accounts were often conduits for money fraudulently obtained by bad actors.
In December 2023, the Central Bank changed these rulesgiving fintech startups a deadline of March 2024 to request identification for all account classes.