The Securities and Exchange Commission, on behalf of the Federal Government, is planning to remove the naira from all peer-to-peer crypto platforms as part of efforts to address exchange rate manipulation and dollar fraud.
This decision comes after the recent efforts by the Federal Government to oversee Nigeria’s $57bn crypto market.
During a meeting with members of the Nigerian blockchain industry on Monday, the newly-appointed Director-General of the Commission, Emomotimi Agama, revealed the government’s latest plan.
The Blockchain Industry Coordinating Committee of Nigeria arranged the meeting.
Agama confirmed that the government is currently formulating new regulations to govern the crypto sector.
It is alleged that operators in the crypto space have used P2P platforms to manipulate the naira and the exchange rate.
“That is one of the things that must be done to save this space; the delisting of the naira from the P2P platforms to avoid the level of manipulation that is currently happening. I want your cooperation in dealing with this as we roll out regulations in the coming days,” the SEC DG told the members of the local crypto community.
Agama’s announcement came just one week after the Central Bank of Nigeria instructed payment service banks to advise their customers against engaging in crypto transactions.
It is understood that some local exchanges in the country, such as OKX, Bitbarter and platforms under the membership of Stakeholders in the Blockchain Technology Association of Nigeria, had already ceased naira services in solidarity with the government.
In March, SiBAN sought collaboration with the Federal Government for proper regulation after developing the Virtual Assets Service Providers Code of Conduct in 2022.
However, the SEC DG urged members of the crypto community in Nigeria to “name and shame” the players involved in the manipulation of the naira.
He emphasized that some dishonest actors in the industry were manipulating the national currency, an issue the government was determined to address.
Agama said, “We ask with all sense of sincerity that those involved in sharp practices cease. We encourage you to reach out to us by naming and shaming those involved.
“This nation has a future, and this future is dependent on this community. For us at the SEC, our interest is to provide an enabling environment for fintech to thrive, and by so doing; we expect the fintech community to reciprocate by doing the right thing.
“Patriotism can never be wished away. Whatever we do that would bring dishonor to our country, we must try to avoid it. What is very critical and has brought about this meeting are the concerns regarding crypto P2P traders and their effect on the naira.”
He stressed that the SEC under his leadership was ready for an innovative digital asset regulatory regime that would maintain Nigeria as Africa’s digital asset powerhouse with various solutions like real-world asset tokenization.
According to him, this will drive wealth and stimulate the country’s capital market.
He said, “We need to find new solutions to this problem and find the right balance between encouraging innovation and protecting our national economic interests. We will do this in a friendly and firm way to achieve the desired result.
“I want to stress that we are working on different fronts to maintain ethical practices in our market. However, we are here to identify those operating within the sector ethically and are open to hearing your suggestions on how we can effectively manage all hidden cryptocurrency trading activities within our jurisdiction, including P2P trading, despite the challenges it poses.”
Sunday PUNCH reported that the planned Monday meeting would involve the government taking decisive action on the sector.
Nigeria’s crypto transactions increased by nine percent year-over-year to $56.7bn between July 2022 and June 2023, according to the 2023 Geography of Cryptocurrency Report by Chainalysis, a US-based international blockchain analysis firm.
Stakeholders seek collaboration.
The Chairman of the Fintech Association of Nigeria, Dr. Babatunde Obrimah, praised the SEC DG for the bold steps and the proposed partnership with the ecosystem.
He promised the association’s commitment to working with the DG to clean up the virtual ecosystem.
BICCoN requested the establishment of a working group to address the various challenges facing the crypto space and move the market forward.
Chukwuemeka Ezike, the co-founder of a local exchange, Bitbarter.io, told The PUNCH that operators within the ecosystem were willing to support and work with the government to ensure that some of the issues relating to the naira’s value were resolved.
While recognizing that significant investments have been made in building their platforms, he said it would be essential to work out possible solutions to enhance the sector’s growth.
On Saturday, the Chairman of BICCoN, Lucky Uwakwe, had said that the group would be seeking to reach a middle ground with the regulator.
Ukakwe said the meeting “is for us to try and bring the industry to be compliant and remove bad actors who abuse technology, especially the concern raised by the government. This has to do with those who use the technology to manipulate the naira.
“We also hope that innovation is encouraged to enable the industry to gain more foreign inflow that will aid the current administration’s drive for foreign investment into the nation, as seen in other countries such as China and the UAE, and not to stifle the industry.”
Fintechs.
Last week, the CBN stopped major fintech firms from onboarding new customers in an ongoing audit of their Know-Your-Customer process.
The ‘Know Your Customer’ compliance level of fintechs has also been a source of worry for regulators. This involves verifying a customer’s identity and understanding their financial activity to prevent financial crimes, such as money laundering, terrorist financing, and fraud.
According to the Nigeria Inter-Bank Settlement System’s fraud watch report, fraud losses increased by 496.96 percent over the past five years, and financial institution customers lost N59.33bn between 2019 and 2023.
After the government's action, major financial technology companies, including Opay and PalmPay, sent emails to their customers on Friday, cautioning them against trading in cryptocurrency or any virtual currency on their apps. They also warned that they would block any accounts that are found involved in such activities.
The Economic and Financial Crimes Commission has obtained a court order to freeze at least 1,146 bank accounts owned by various individuals and companies allegedly engaged in illegal foreign exchange transactions.
The PUNCH obtained the 85-page court order (document) on Monday, which listed the bank account details of the suspects.
Justice Emeka Nwite, in a ruling on the ex-parte motion presented by the counsel for the anti-graft agency, Ekele Iheanacho, also granted the commission’s request to complete the investigation within 90 days.
Part of the court document stated, “The applicant’s (EFCC) application is hereby granted as requested.
“An order of this honorable court is hereby made freezing the bank accounts stated in the schedule below, which accounts are owned by various individuals who are currently being investigated in a case involving the offenses of unauthorized dealing in foreign exchange, money laundering, and terrorism financing, to the extent that the investigation will be for a period of 90 (ninety) days.”
The President of the Bank Customers Association of Nigeria, Uju Ogubunka, supported the CBN’s decision to suspend new account openings on the affected platforms.
He informed The PUNCH that the stringent regulations that govern deposit money banks must be applicable to financial technology companies and microfinance banks to ensure the integrity of the financial institutions.
He commented, “Any action that can disrupt the system should not be allowed. If the platforms are being used for activities that contravene the regulations, I think the CBN decision is appropriate. I don’t see anything wrong with that. It is now the responsibility of the companies to ensure compliance with the KYC regulations.
In 2021, the CBN prohibited banks and other financial institutions from operating accounts for cryptocurrency service providers.
However, in December 2023, the financial regulator lifted the ban.
But new concerns arose in February about the activities of the largest cryptocurrency exchange in the world, Binance, on its peer-to-peer platform, particularly regarding its price cap on USDT trading.
Authorities stated that those activities contributed to the devaluation of the naira.
On March 8, Binance ceased its naira services after two of its executives were detained by the Nigerian authorities.
A presidential spokesperson, Bayo Onanuga, mentioned that Binance could damage the Nigerian economy by arbitrarily fixing the foreign exchange rate if not stopped.
While confirming that the government has taken strict action against the website, Onanuga said, “If we don’t clamp down on Binance, Binance will destroy the economy of this country. They just fix the rate.”
“We have saboteurs. Look at what Binance is doing to our economy. That is why the government moved against Binance. Some people sit down using cyberspace to dictate even our exchange rate, hijacking the role of the CBN.
“They simply choose to repair anything they want. It’s undermining, and we are attempting to stop that from happening in the future.”
