Nigeria Considers Outlawing P2P Crypto Trading Over National Security Concerns

Nigeria is on the verge of declaring peer-to-peer (P2P) crypto trading as a national security threat, with the National Security Adviser (NSA) reportedly preparing to categorize crypto trading as a risk to the nation’s security. This move signals a potential crackdown on P2P crypto transactions in the country, according to reports from local media and sources from CryptoSlate.

The decision comes in the wake of three major Nigerian fintech startups – Moniepoint, Paga, and Palmpay – taking action to block accounts engaged in crypto activities and reporting such transactions to law enforcement, as part of efforts to curb illicit financial activities.

CEO of Moniepoint, Tosin Eniolorunda, has indicated that the NSA’s classification of crypto trading as a security threat is likely to lead to the introduction of new regulations that would ban P2P crypto trading. An official announcement regarding these regulations is anticipated in the near future.

This shift in regulatory stance is significant, especially considering that the Central Bank of Nigeria had lifted a two-year ban on crypto transactions in December 2023, indicating a more favorable regulatory environment at the time. However, recent developments suggest a reversal in this approach, with authorities attributing the volatility of the foreign exchange market to crypto speculators.

The proposed ban on P2P trading is based on the Central Bank’s claims that crypto traders use this method to manipulate the Nigerian naira through pump-and-dump schemes. Central Bank Governor Olayemi Cardoso alleged that Binance, a prominent crypto exchange, facilitated billions of dollars in untraceable transactions, prompting a crackdown on the exchange and freezing of over 1,000 bank accounts connected to P2P transactions.

In another instance, four major fintech companies were instructed to stop opening new customer accounts, with the reasoning behind this directive remaining unclear. Moniepoint’s CEO confirmed that the NSA was behind this directive, expressing concerns about the ease with which fintech platforms enable account openings, particularly Tier 3 accounts.

With mounting concerns over the rapid increase in accounts facilitated by fintech startups, especially amidst fears of them being used for illicit purposes, regulatory authorities are tightening their oversight. The Central Bank, for instance, mandated fintech startups to verify the identities of all account holders by March 2024, as part of efforts to enhance transparency and combat financial crimes.

As Nigeria gears up for further regulatory actions in the crypto space, the future of P2P trading hangs in the balance amid growing national security worries and evolving regulatory frameworks.