The Nigerian naira continues its downward spiral despite the tightening of the noose around cryptocurrency trading. The government has blamed digital assets for the currency’s woes and launched a multi-pronged attack on them, forcing major exchanges to retreat and pushing traders toward riskier avenues.
Central Bank Charges Cryptocurrency
The Central Bank of Nigeria (CBN) sees cryptocurrencies as the villain in the naira depreciation drama. Officials allege rampant manipulation of currency values ​​through pump-and-sell schemes on peer-to-peer (P2P) platforms. They claim this undermines their efforts to stabilize the naira through monetary policy.
Exchanges are feeling the heat
The accusations have had a chilling effect on the digital currency business. Major exchanges such as Binance, OKX, and most recently KuCoin have suspended naira support for their P2P platforms due to fears of regulatory retaliation or outright bans.
KuCoin downplayed the move in a statement on Wednesday, calling it a “temporary pause” to ensure compliance with local regulations. However, the lack of a clear timetable for recovery has left Nigerian Bitcoin traders in limbo.
Looming P2P ban pushes traders into the shadows
The situation is likely to worsen as the Nigeria Securities and Exchange Commission (SEC) plans to impose a complete ban on cryptocurrency P2P trading. The move, if passed, would effectively push crypto trading into the shadows of encrypted messaging apps.
Experts warn that this shift will expose traders to a Wild West environment rife with scams, exploitative rates and a complete lack of consumer protection.
Central Bank freezes transactions, EFCC targets traders
The CBN has not stopped regulating exchanges. Over the past two weeks, they have directed financial institutions to freeze and report all cryptocurrency transactions. The move effectively cuts off any legal way for Nigerians to use the naira to buy or sell cryptocurrencies.
Adding fuel to the fire, Nigeria’s anti-corruption agency, the Economic and Financial Crimes Commission (EFCC), has frozen more than 1,000 cryptocurrency trader accounts in the past three weeks. The accounts are reportedly under investigation for money laundering and terrorism financing, allegations that many view as suspicious given the inherent transparency of blockchain technology.
Effectiveness of crackdown in doubt
Despite the proactive measures, the naira continues to fall. Currently, it is trading at 1,520 naira to the US dollar. This suggests that the crackdown on cryptocurrencies may be a misguided attempt to scapegoat technology to solve complex economic problems.
Lack of clarity frustrates businesses
The Nigerian government’s approach has also been criticized for a lack of transparency. Binance CEO Richard Teng shared his frustrations in a recent blog post, highlighting their year-long efforts to obtain licensing information from the Nigerian SEC, all in vain.
The lack of a clear regulatory framework prevents legitimate cryptocurrency businesses from operating, further driving the industry underground.
Featured image from Getty Imageschart from TradingView
