The Nigerian government has continued its crackdown on cryptocurrencies in the country after the Securities and Exchange Commission revealed plans to delist the Naira from peer-to-peer platforms to combat currency manipulation.
- The commission’s Director General, Emomotimi Agama, issued the directives after meeting with stakeholders in the Nigerian blockchain industry – highlighting that more regulations will follow in the coming weeks.
- These regulations are set to create a monitored ecosystem for Cryptocurrency dealers in the country, aiming to restore integrity and stability in an enterprise crawling with tax cheats and financial criminals.
- According to the Nigerian media, some Fintechs being monitored by security agencies – such as Kuda and Moniepoint – are giving cryptos a wide berth to evade the regulation storm that security agencies and the Central Bank of Nigeria (CBN) have invoked in the financial sector recently.
“That is one of the things that must be done to save this space. The delisting of the naira from the P2P platforms 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,” said Emomotimi Agama.
An executive of one of the Crypto companies in Nigeria, Ray Youssef, told the country’s media that peer-to-peer trading accounts for almost US$ 500 billion in the country. However, official reports state that every year Nigerians deal in US$ 59 billion worth of cryptocurrencies.
Despite lifting its ban on Cryptocurrencies in December 2023, the Nigerian government is still adamant to let this highly deregulated market fare on. Since that period, a slew of regulations have been enacted to clamp down on financial activities within the sector – measures which some experts have regarded as too punitive even for legitimate traders.
The war against crypto took a surprising turn in February when the country’s federal government blocked the Binance website in the country and later arraigned the company’s top executives for tax evasion and fraud. The CBN had mentioned the world’s largest crypto traders was a loophole in the nation’s financial sector, indicating that about US$ 26 billion was illegally channelled out of the country through the platform.
As the Naira lags on in its thousandth mark to the dollar, the Nigerian government has blamed crypto traders and associated Fintechs – some of which were banned from new account openings – for causing the currency to depreciate through a series of forex manipulation strategies such as the pump-and-dump strategy.
What is the Pump-and-Dump Strategy?
In speculative trading, the pump-and-dump strategy involves a group of malicious investors artificially inflating the value of assets such as cryptos or stock. This can be done through misleading members of the public by hyping up the value to attract more investors.
However, the real value of the asset is always significantly lower than the hype dictates. Once many investors are on board, the price of the asset rises and the original investors sell off their assets at a profit. Later on, the enterprise is discovered to have been a sham and a multitude of losses proceed.
This market activity can cause currency volatility due to the heightened uncertainties, lucrative price hikes that look surreal, and too-good-to-be-true prospects that hyped assets promise.
However, some of the nation’s traders have mentioned that the country’s economic situation has a deeper problem that cannot be entirely heaped on the deregulated financial sector.
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