Nigeria’s naira keeps spiraling down even with a tightening noose surrounding trading cryptocurrencies. Blaming digital assets for the problems with the currency, the government has started a multi-pronged attack on the digital asset, driving traders towards riskier paths and forcing significant withdrawals from major exchanges.
Central Bank Points Finger At Crypto
In the naira’s devaluation drama, the Central Bank of Nigeria (CBN) has painted cryptocurrencies as the villain. Officials claim extensive manipulation of the value of the currency by means of pump-and-dump programs on peer-to–peer (P2P) systems. This, they say, compromises their attempts to stabilize the naira by means of monetary policy.
Exchanges Feeling The Heat
Digital currency companies have suffered chilling consequences from the finger-pointing. Major exchanges including Binance, OKX, most recently KuCoin, have all stopped naira support on their P2P systems fearing regulatory reprisals or an outright ban.
KuCoin minimized the action in a Wednesday notice as a “temporary pause” to guarantee local rule compliance. But without a defined resuming schedule, Nigerian bitcoin dealers are left in uncertainty.
Looming P2P Ban Pushes Traders Into The Shadows
The problem is probably going to get worse since the Nigerian Securities and Exchange Commission (SEC) intends to completely forbid P2P trading of cryptocurrencies. Should this measure be passed, crypto transactions will be essentially hidden behind encrypted chat 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 is not stopping at control of exchanges. Over the past two weeks, they have directed banking institutions to stop and document any bitcoin transactions. This action essentially closes any legal path for Nigerians to use their naira for purchase or sale of cryptocurrencies.
Fueling the heat, the anti-graft agency Economic and Financial Crimes Commission (EFCC) of Nigeria has frozen over 1,000 crypto trading accounts throughout the past three weeks. Allegations that many find suspicious considering the openness of blockchain technology, these accounts are apparently under investigation for money laundering and terrorism financing.
Crackdown’s Effectiveness Questioned
The naira continued its declining path in spite of the strong policies. It trades now for a pitiful 1,520 naira to the US dollar. This implies that the crypto crackdown could be a foolish effort using a technical scapegoat to solve a complicated economic problem.
Lack Of Clarity Frustrates Businesses
Furthermore attacked for lack of openness is the attitude of the Nigerian administration. In a recent blog post, Binance CEO Richard Teng expressed his dissatisfaction with their year-long attempts—all in vain—to acquire licensing information from the Nigerian SEC.
This lack of a defined legislative framework makes it impossible for respectable crypto companies to operate, therefore driving the sector underground.
Featured image from Getty Images, chart from TradingView