Over $50b may be trapped in crypto exchanges as FG begins clamp down

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Over $50b may be trapped in crypto exchanges as FG begins clamp down

•To stop trading of naira on P2P platforms

The Federal Government, through the Securities and Exchange Commission (SEC), is set to stop the trading of naira on all virtual peer-to-peer (P2P) platforms to hedge the currency against manipulation.

The plan, if successful, would close the cryptocurrency trading door against fresh entrants, leaving existing investments estimated at over $50 billion trapped on different exchanges.

But traders see the move as a mere official statement that may not be practically enforceable.

This is not the first time the government has moved against crypto platforms. The most recent case involving Binance only triggered the adoption of offers by rival virtual asset custodians firms where millions of young people now trade usdt (the leading stablecoin used to buy other cryptocurrencies) for naira.

The SEC’s Director-General, Emomotimi Agama, disclosed the latest move during an interactive session with the Nigerian blockchain industry, yesterday. This is expected to be part of a couple of regulations that will be rolled out in the coming days to rein in the reckless manipulation of naira using virtual currencies.

Agama said: “That is one of the things that must be done to save this space. The delisting of the naira from the P2P platforms is 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.”

Agama, who made efforts to reassure the ecosystem’s stakeholders at the meeting, declared that SEC was ready to work with everyone in the space. He noted that the commission is updating its guidelines in the hope of ensuring best practices.

The SEC DG decried how some market players were manipulating the value of the naira and explained that it is why the commission is “Seeking collaboration and help in making sure that the crypto environment is respected globally”.

Agama’s declaration is coming on the heels of a recent directive from the Central Bank of Nigeria (CBN) mandating fintechs to warn their customers against engaging in crypto transactions.

The SEC’s regulation will look thoroughly into the cryptocurrency ecosystem ranging from Wallet providers, digital asset custodians and fund managers, cryptocurrency crowdfunding, initial coin offerings (ICOs), security token offerings (STOs), among others to ensure that every Nigerian playing in the ecosystem is included, supported and properly regulated.

According to Agama, the proposed regulatory guideline is currently being fine-tuned with suggestions by various stakeholders.

The SEC boss said the recent concern regarding crypto P2P traders and their perceived impact on the exchange rate of the Naira has underscored the need for collective action and dialogue within the financial market ecosystem.

“We ask that those involved in sharp practices that undermine national interest should cease. It is in our interest as a people to protect what belongs to us. We encourage you to reach out to us by naming and shaming the bad actors. Together, I am confident that we can weed out bad actors and harness the immense potential of this progressive technology for the benefit of all Nigerians in tandem with this government’s renewed hope agenda” he added.

Agama stated that the SEC Nigeria will not hesitate to utilise all the powers within its mandate to handle issues that are negative and pose a threat to national interest saying that the Commission has come as a partner to seek collaboration in making sure that the capital market community is respected globally for decency and fair play.

“I am poised for an innovative digital asset regulatory regime that will sustain Nigeria as Africa’s Digital Asset Powerhouse with diverse solutions like Real World Asset Tokenization (RWA) that will drive wealth and catalyse our capital market. We must explore innovative solutions to this problem and strike the right balance between encouraging innovation and safeguarding our national economic interests. This we will do in a friendly and firm manner, to enable us to achieve the desired result.”

Recall that the P2P sub-sector has been found to have been subjected to various forms of manipulations, which is causing cracks within the ecosystem.

The Economic and Financial Crimes Commission (EFCC) secured an interim court order on April 24, 2024, to freeze these accounts for 90 days while investigations continue.

After these freezes, several fintechs, including OPay, Moniepoint, PalmPay, and Kuda Bank, were asked to temporarily suspend the opening of new accounts pending the Central Bank of Nigeria’s evaluation of its Know Your Customer process.

Recall that in 2021, the CBN had restricted banks and other financial institutions from operating accounts for cryptocurrency service providers.

However, in December 2023, the financial regulator lifted the ban and announced a reversal of the policy.

Fresh concerns emerged in February over the activities of the largest cryptocurrency exchange in the world, Binance, on its peer-to-peer platform, such as implementing a price cap on USDT trading.

Authorities said those activities contributed to the devaluation of the naira and destabilised Nigeria’s economy.

Already, research by invezz.com, which predicted a cryptocurrency future brimming with promise in Nigeria, informed that crypto ownership among Nigerians was 46 per cent in 2023.

According to it, 90 per cent of Nigerians are planning future cryptocurrency investments, the highest globally.

It revealed that Nigeria ranked second globally for crypto adoption in 2023 and first globally for P2P cryptocurrency transactions last year.

According to it, Bitcoin adoption rate stands at 76 per cent among Nigerian crypto investors and crypto adoption in Nigeria increased by 15 per cent between 2020 and 2023.

The research revealed that Nigeria has the highest level of cryptocurrency awareness globally, reaching 99 per cent.

It disclosed that in Nigeria, there is no gender gap in cryptocurrency adoption, with a 50-50 split between men and women investors.

Invezz.com said most Nigerians want to use crypto profits to start a business (40 per cent) and improve their families’ lives (40 per cent).

According to it, volatility in the cryptocurrency market is the biggest barrier to crypto adoption in Nigeria.

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