The Nigerian government plans to clamp down P2P crypto trading

  • Crypto traders burst as the Nigerian government plans to clamp down P2P crypto trading:

In just 30 days, the naira was declared the “best” performing currency in the world, but last week, the federal government pulled out all the stops, clamping down on cryptocurrency trading and “unregistered” Bureau de Change (BDC) operators, also known as Aboki, two organizations it had labeled as “killers” of the currency.

This occurred two days after the Securities and Exchange Commission’s (SEC) Director General, Dr. Emomotimi Agama, said in a virtual meeting with the Nigerian Blockchain Industry Coordinating Committee, the governing body of all major blockchain and cryptocurrency.  The government plans to install a new regulatory framework for cryptp exchanges

In an announcement that briefly trended on social media, Agama stated that the Nigerian government was getting ready to enact new laws that would outlaw peer-to-peer (P2P) cryptocurrency exchanges using the naira. This move is intended to safeguard the local currency against manipulation by custodians and other industry players. However, it was nothing new, and many questioned the government’s intended method of enforcing the P2P prohibition.

“Recent concerns regarding crypto P2P traders and their perceived impact on the exchange rate of the naira have underscored the need for collective action,” Agama said.

But a big part of that was also the hike in interest rates and the sale of Treasury bills in dollars at a rate of about 22 percent, which, according to the authorities, was oversubscribed by 245 percent. While questions remain about how the government would raise funds to repay in 12 months, the dollars raised may have helped the Olayemi Cardoso led CBN in its quest to ‘save the naira.’

Government-recognized BDC operators were given dollars at subsidiary rates, and mandated not to sell beyond a certain threshold. It proved to be the magic wand. In days, naira gained almost 40 percent, and all was well again and looking up.

But not supported by improved export or any other fundamental, the good news was destined to be short-lived. In more recent days, the naira has reversed its gains, earning yet again, the tag of world’s worst performing currency in the last month.

On Friday, the naira slipped to 1,466.31 to the dollar at the official market, and N1470 in the parallel section, its weakest level since March 20, triggered by local scarcity of dollars, which had on Thursday halved from the day before to just $84 million.

Analysts suggest that an estimated $1.3 billion in naira futures billed to mature at the end of this month is playing a big role on market sentiment, as it is expected to create more demand for dollars. But it would appear that as far as the authorities are concerned, crypto has to be the main culprit.

Agama, the SEC boss, maintained during the engagement last Monday that the country will not hesitate to utilise all the powers within its mandate to handle issues that are negative and pose a threat to national interest, arguing that the recent concerns regarding crypto P2P traders and their perceived impact on the exchange rate of the Naira have underscored the need for collective action and dialogue within the financial market ecosystem.

“There are basic practices as enshrined in the Investments and Securities Act 2007, and we expect that everyone will abide by those rules. However, for specific digital asset regulatory regimes that many have been calling for, we want to assure you that we are working tirelessly to establish an accommodating regulatory guideline for digital assets,” he added, noting that the proposed regulatory guidelines, which are currently being fine-tuned with suggestions by various stakeholders, will encompass various activities within the cryptocurrency ecosystem, ensuring that every Nigerian playing within the industry with the potential to contribute to economic progress is included, supported, and properly regulated.

The government’s concern in this regard appears justifiable. As at 2020, data from Paxful, a peer-to-peer bitcoin marketplace, indicated that the value of bitcoins traded in Nigeria over the previous five years was more than any country in the world, except the United States. And traders often arbitrarily fixed their own rates.

The clamp down, which included the arrest and detention of two employees of Binance, Tigran Gambaryan and Nadeem Anjarwalla, and restriction of access to practically all crypto exchange apps and websites, appeared to achieve huge results. The local currency rallied from a historic low of N1,900/$ in February, to N1,100 in early April, earning ‘best performing currency tag.’

But a big part of that was also the hike in interest rates and the sale of Treasury bills in dollars at about 22 percent, which, according to the authorities, was oversubscribed by 245 percent. While questions remain about how the government would raise funds to repay in 12 months, the dollars raised may have helped the Olayemi Cardoso led CBN in its quest to ‘save the naira.’

Government-recognized BDC operators were given dollars at subsidiary rates, and mandated not to sell beyond certain threshold. It proved to be the magic wand. In days, naira gained almost 40 percent, and all was well again and looking up.

But not supported by improved export or any other fundamental, the good news was destined to be short-lived. In more recent days, the naira has reversed its gains, earning yet again, the tag of world’s worst performing currency in the last month.

On Friday, the naira slipped to 1,466.31 to the dollar at the official market, and N1470 in the parallel section, its weakest level since March 20, triggered by local scarcity of dollars, which had on Thursday halved from the day before to just $84 million.

Analysts suggest that an estimated $1.3 billion in naira futures billed to mature at the end of this month is playing a big role on market sentiment, as it is expected to create more demand for dollars. But it would appear that, as far as the authorities are concerned, crypto has to be the main culprit.

Agama, the SEC boss maintained during the engagement last Monday that the country will not hesitate to utilise all the powers within its mandate to handle issues that are negative and pose a threat to national interest, arguing that the recent concerns regarding crypto P2P traders and their perceived impact on the exchange rate of the Naira have underscored the need for collective action and dialogue within the financial market ecosystem.

“There are basic practices as enshrined in the Investments and Securities Act 2007, and we expect that everyone will abide by those rules. However, for specific digital asset regulatory regimes that many have been calling for, we want to assure you that we are working tirelessly to establish an accommodating regulatory guideline for digital assets,” he had added, noting that the proposed regulatory guidelines, which are currently being fine-tuned with suggestions by various stakeholders, will encompass various activities within the cryptocurrency ecosystem, ensuring that every Nigerian playing within the industry with the potential to contribute to economic progress is included, supported and properly regulated.

The government’s concern in this regard appears justifiable. As at 2020, data from Paxful, a peer-to-peer bitcoin marketplace, indicated that the value of bitcoins traded in Nigeria over the previous five years was more than any country in the world, except the United States. And traders often arbitrarily fixed their own rates.

Credit: HallMakNews

Ekene Njoku

I am a passionate blogger, graphics designer, web designer and information researcher. Also, a media marketer

Leave a Reply

Your email address will not be published. Required fields are marked *