Nigeria’s naira continues its downward spiral despite a tightening noose around cryptocurrency trading. The government, blaming digital assets for the currency’s woes, has launched a multi-pronged attack on the digital asset, forcing major exchanges to retreat and pushing traders towards riskier avenues.
Central Bank Points Finger At Crypto
The Central Bank of Nigeria (CBN) has cast cryptocurrency as the villain in the naira’s depreciation drama. Officials allege rampant manipulation of the currency’s value through pump-and-dump schemes on peer-to-peer (P2P) platforms. This, they claim, undermines their efforts to stabilize the naira through monetary policy.
Exchanges Feeling The Heat
The finger-pointing has had a chilling effect on digital currency businesses. Fearing regulatory retribution or an outright ban, major exchanges like Binance, OKX, and most recently, KuCoin, have all suspended naira support on their P2P platforms.
KuCoin, in a Wednesday announcement, downplayed the move as a “temporary pause” to ensure compliance with local regulations. However, the lack of a clear timeline for resumption leaves Nigerian bitcoin traders in limbo.
Looming P2P Ban Pushes Traders Into The ShadowsThe situation is likely to worsen as the Nigerian Securities and Exchange Commission (SEC) plans a full-blown ban on crypto P2P trading. This move, if enacted, will effectively push crypto transactions 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.
The CBN is not stopping at regulating exchanges. In the past two weeks, they have instructed financial institutions to freeze and report all cryptocurrency transactions. This move effectively cuts off any legal avenues for Nigerians to buy or sell crypto using their naira.
Adding fuel to the fire, the Economic and Financial Crimes Commission (EFCC), Nigeria’s anti-graft agency, has frozen over 1,000 crypto trader accounts in the past three weeks. These accounts are reportedly under investigation for money laundering and terrorism financing, allegations that many find dubious given the transparency inherent in blockchain technology.
Crackdown’s Effectiveness QuestionedDespite the aggressive measures, the naira continues its downward trajectory. Currently, it trades at a dismal 1,520 naira to the US dollar. This suggests that the crypto crackdown might be a misguided attempt to address a complex economic issue with a technological scapegoat.
Lack Of Clarity Frustrates BusinessesThe Nigerian government’s approach has also been criticized for its 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.
This lack of clear regulatory framework makes it impossible for legitimate crypto businesses to operate, further pushing the industry underground.
Featured image from Getty Images, chart from TradingView