The decision comes on the heels of actions taken by several prominent Nigerian fintech startups, including Moniepoint, Paga, and Palmpay, which have recently moved to block accounts engaged in crypto activities and report such transactions to law enforcement agencies.

Tosin Eniolorunda, CEO of Moniepoint, has indicated that the NSA’s forthcoming classification may herald the introduction of new regulations specifically aimed at banning P2P crypto trading. An official announcement on this matter is expected in the near future.

This proposed crackdown marks a notable departure from the regulatory approach previously adopted by the Nigerian government. Notably, the administration under Bola Tinubu had shown a more permissive attitude toward cryptocurrency, as evidenced by the Central Bank of Nigeria’s decision to lift a two-year ban on crypto transactions in December 2023, signaling a more favorable regulatory environment.

This regulatory pivot marks a notable departure from previous stances, notably during the tenure of the Bola Tinubu administration, which exhibited a relatively lenient attitude toward cryptocurrencies. The lifting of a two-year ban on crypto transactions by the Central Bank of Nigeria in December 2023 had signaled a thawing regulatory environment, albeit temporarily.

However, recent months have witnessed a paradigm shift, with authorities attributing the volatility of the foreign exchange (FX) market to crypto speculators. Allegations abound that crypto traders exploit P2P trading mechanisms to manipulate the Nigerian naira through pump-and-dump schemes, prompting regulatory scrutiny.

Central Bank Governor Olayemi Cardoso’s claims in February 2024, implicating Binance in facilitating $26 billion in untraceable transactions, have further fueled the fire. The subsequent crackdown on the exchange and the freezing of over 1,000 bank accounts linked to P2P transactions underscore the gravity of the situation.

However, recent months have witnessed a shift in this stance, with authorities attributing heightened volatility in the foreign exchange (FX) market to crypto speculators. The proposed ban on P2P trading is grounded in the Central Bank’s assertion that crypto traders exploit this method to manipulate the value of the Nigerian naira through pump-and-dump schemes.

Central Bank Governor Olayemi Cardoso raised eyebrows in February 2024 when he alleged that Binance, a major cryptocurrency exchange, had facilitated approximately $26 billion in untraceable transactions. This accusation led to a crackdown on the exchange, resulting in the freezing of over 1,000 bank accounts linked to P2P transactions.

In a related development, four prominent fintech firms were recently instructed to cease the opening of new customer accounts, though the precise source of this directive remains unclear.

Tosin Eniolorunda of Moniepoint confirmed that this directive originated from the NSA, citing concerns over the ease with which fintech platforms facilitate account openings, particularly Tier 3 accounts.

While a spokesperson for the NSA declined to elaborate further on these developments, the situation underscores the heightened scrutiny surrounding the rapid proliferation of accounts facilitated by fintech startups. Traditional banks have long voiced concerns that such accounts serve as conduits for illicit funds.

In response to these concerns, the Central Bank implemented amendments to its rules in December 2023, mandating fintech startups to verify the identities of all account holders by March 2024.

As Nigeria grapples with the intersection of cryptocurrency, national security, and financial regulation, the outcome of these deliberations is poised to shape the future landscape of the country’s digital economy. With stakeholders closely monitoring developments, the coming months are likely to witness further clarity on the regulatory framework governing crypto transactions in Nigeria.