Nigeria’s central bank has had a change of heart following its crackdown on crypto assets through the financial industry and this latest development has made most of the country’s residents express surprise and skepticism.
However, this looks like a contradiction from the CBN’s previous stance. It had earlier instructed financial institutions to assist with account opening, offer certain settlement services, and serve as middlemen for businesses that transact in cryptocurrency assets in a circular that was published late last year.
In light of Nigeria’s National Security Adviser (NSA) categorizing cryptocurrency trading as a matter of national security, four fintech startups in the country, namely Opay, Moniepoint, Paga, and Palmpay, will take measures to restrict the accounts of customers involved in cryptocurrency transactions. Additionally, these startups will promptly report any such transactions to the relevant law enforcement agencies.
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The Crack Down On Crypto Industry
Last week, the Central Bank of Nigeria (CBN) prohibited well-known fintech firms such as Kuda, Opay, PalmPay, and Moniepoint from onboarding new customers.
The central bank’s decision was linked to an ongoing evaluation of the fintech firms’ Know-Your-Customer procedures. These firms have been the subject of scrutiny in the past few months over concerns regarding illicit financial activities such as money laundering and terrorist financing.
Nigeria, the most populous country in Africa, ranks second globally in terms of Bitcoin interest, despite the government’s ban on banks offering services to cryptocurrency users. The nation, plagued by high inflation rates, blames the crypto industry for the recent devaluation of the naira
Consequently, a court order had been obtained by the Economic and Financial Crimes Commission (EFCC) to freeze at least 1,146 bank accounts belonging to different people and businesses that were allegedly engaged in illicit foreign exchange dealings.
OPay warned in a notification on Friday that it would impose severe penalties on users who disobey its policies, which are in line with the CBN’s position on cryptocurrency trading.
Please be aware that OPay forbids the trade of any virtual money, including cryptocurrencies, under the instruction issued by the CBN. Any account that engages in these kinds of activities will be closed, and regulatory authorities will receive access to client information.” the fintech firm said.
This appears to contradict the CBN’s previous position. In a circular released towards the end of last year, the CBN had directed financial institutions to aid in opening accounts, provide specific settlement services, and act as intermediaries for businesses dealing in cryptocurrency assets.
Backstory
Last year, the Central Bank of Nigeria (CBN) lifted a two-year ban on crypto transactions, while the Securities and Exchange Commission (SEC) engaged in discussions with at least three cryptocurrency exchanges regarding licenses.
CBN has denied a report stating that it had instructed banks and financial institutions to identify individuals or organizations engaging in transactions with cryptocurrency exchanges and to place their accounts on “Post No Debit” instructions for six months.
Market leaders view this action as unproductive since the majority of peer-to-peer transactions happen through obscure channels. According to Ray Youssef, the CEO of NoOnes, P2P transactions predominantly occur on platforms like WhatsApp, and Telegram, in coffee shops, and public spaces, rather than on Binance or any other established platform.
On Binance P2P, NoOnes, or any of these other platforms, the majority of peer-to-peer activity does not occur. They take place in coffee shops, on the streets, on Telegram and WhatsApp, and everywhere else.
” Most peer-to-peer communication takes place there. And $60 billion, if I may estimate, passing through the centralized exchanges. Because Nigerians are so resourceful and can find uses for things that weren’t necessarily intended for them, I believe that the majority of that is a peer-to-peer volume that they are also sort of hiding,” he continued.
The Federal Government (FG) had previously levied allegations against Binance, claiming that the platform had been promoting currency speculation, which subsequently led to a significant decline in the value of the naira. As a result, the FG extended an invitation to two executives from Binance to visit the country. However, upon their arrival, both individuals were apprehended, and one of them successfully escaped.
What You Should Know
- Nigeria boasts the most extensive cryptocurrency economy in Africa when considering trade volume, with a significant number of its citizens embracing crypto assets amidst a youthful and dynamic population.
- Nevertheless, the recently appointed Director-General of SEC has managed to instill hope and assurance within Nigeria’s blockchain community. The new SEC Chair’s favorable stance towards cryptocurrencies is seen as an advantageous asset for the local crypto industry.
- Emomotimi Agama, a former managing director of the Nigerian Capital Market Institute (NCMI), has been named by Nigerian President Bola Tinubu as the new chair of the SEC.
