Operation Rescue Naira: FG Considers Strict Regulations for $57 Billion Crypto Businesses

The Federal Government of Nigeria is contemplating stringent measures, including potentially suspending the $56.7 billion peer-to-peer cryptocurrency market, following a pivotal meeting slated for Monday between the Securities and Exchange Commission (SEC) and digital asset operators.

According to the 2023 Geography of Cryptocurrency Report by Chainalysis, Nigeria experienced a nine percent year-over-year increase in crypto transactions, reaching $56.7 billion between July 2022 and June 2023.

The SEC’s initiative signals the government’s broader strategy to bolster regulatory oversight within the cryptocurrency sector, amid mounting apprehensions surrounding illicit activities and the manipulation of the naira exchange rate.

Earlier this week, the Central Bank of Nigeria (CBN) barred major fintech firms from onboarding new customers as part of an ongoing audit of their Know-Your-Customer processes. This move prompted leading fintech companies like Opay and PalmPay to caution customers against engaging in cryptocurrency trading on their platforms and threatened to block accounts found violating this directive.

The prospect of account suspension has drawn criticism, especially from the 33.4 million active cryptocurrency traders who depend on digital asset trading for their livelihoods.

However, sources familiar with the matter disclosed that during Monday’s meeting, the government might opt to temporarily halt peer-to-peer crypto trading to devise comprehensive regulations for effective oversight of the industry.

Additionally, stakeholders suggest that the government could engage with crypto operators to establish new regulatory frameworks.

While the exact decision remains uncertain, crypto market operators have confirmed the scheduled meeting, emphasizing its focus on current industry developments. The Blockchain Industry Coordinating Committee of Nigeria announced the meeting, facilitated by the newly appointed SEC Director General, Dr. Emotimi Agama.

Although the SEC has yet to officially confirm the meeting, sources close to the commission verified its occurrence, clarifying that no decisions have been finalized.

The resurgence of concerns over cryptocurrency activities stems from the operations of major platforms like Binance, which allegedly contributed to the devaluation of the naira and economic instability. Notably, Binance Nigeria ceased all naira services, including deposits and withdrawals, in March 2024.

In anticipation of Monday’s discussions, industry leaders aim to foster collaboration with regulators to address concerns and foster a conducive environment for innovation and investment inflows.

Meanwhile, the compliance level of fintech firms with Know Your Customer standards remains a focal point for regulators, given the surge in financial fraud cases.