Experts and stakeholders in the blockchain industry have blamed the ongoing events around crypto trading in Nigeria on the policies and actions of the Central Bank of Nigeria (CBN), which tends to distance the regulator from the market.

According to them, the stance of the banking regulator could create a Pandora’s box of challenges that could open doors for bad actors.

They claim the ban may now allow those bad actors who were involved in currency manipulation through crypto trading to even inflict more damage on the economy.

The activities of the bad actors is believed to be denting the image of several legitimate players in the industry.

This comes as concerns mount over plans by the government to ban peer-to-peer (P2P) crypto trading in the country. Although some experts believe that banning P2P may not be feasible as people can exchange money under any guise, players in the industry are concerned that an outright ban would affect several platforms built to facilitate legitimate transactions.

Speaking on the current developments in the industry, the Co-founder of Convexity, a blockchain solutions company, Adedeji Owonibi, said the CBN under the former Governor, Godwin Emefiele, created the P2P market when he shut out banks from crypto transactions.

“The former CBN Governor sent everybody away to P2P because people could use the banking rates. P2P is a creation of the central bank and directly so because as a matter of fact if they had not stopped it, people would have been trading within different cryptocurrency exchanges that are interacting with the banking system. This opened the doors for all kinds of people in the P2P market.

“Now, we have a lot of bad actors that are giving everybody a bad name. The industry players operating legitimately will need to expose the bad actors and let the government know them,” Owonibi said.

Failure to regulate

Owonibi’s thoughts aligned with that of the President of Stakeholders in Blockchain Association of Nigeria (SIBAN), Obinna Iwuno, who argued that if the CBN had regulated the industry, there would have been no rise in P2P because everybody would have been trading through regulated agencies and exchanges.

According to him, with accusing fingers pointed at P2P as sabotaging the economy, there might be more troubles for the industry, except the government sees the need to regulate it.

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“What we are seeing currently is not the action of our industry, but because certain things have been made to look as though this is what our industry represents.

“Accusing fingers are being pointed at us when we are not guilty and it is one that we have to deal with because if we don’t deal with it, it has the possibility of spreading even further than it is now and hurting the industry more than it is already,” he said.

P2P and KYC

For the founder of Blockchain Nigeria User Group, Mr. Chuta Chimezie, the major issue in the blockchain industry is CBN’s inability to look into what the players are doing. He believes the exchanges handling P2P transactions are doing adequate KYC that could help the regulator in regulating the industry.

“Every exchange that I know that does p2p transaction does 100% KYC and they comply maximally to all the standards that the financial reporting standards outline for them to operate. But the problem here is that the industry is still like a ghost to the central bank.

“So, because they are not interfacing with that industry, they don’t even know the effort the people are putting in place. How will the CBN know if they don’t allow them to come under their regulation?

“These guys are dealing with financial services. They are dealing with financial instruments, so bring them into the regulatory environment, make them your friends, make them part of the financial system, and it will be easy for you to know who is doing what,” he said.

Banning P2P

On plans to ban crypto P2P trading in Nigeria, Chimezie said the P2P market in Nigeria has now grown to become an extension of the forex black market. According to him, an outright ban would not help the country because people would always find ways around it by leveraging technology.

But he agreed that there has to be an intervention from the government to save the nation’s currency.

“First of all, we are all Nigerians before being traders and the spirit of patriotism will drive us to agree that no responsible government will fold its hands and allow its national currency to be determined by the agreed level of traders in any platform.

“So, we agree that something needs to be done about that. We agree that there should be regulation and everyone who is involved in issuing, transmitting, or driving any aspect of digital assets should come into a regulatory environment.

“But it doesn’t have to be an outright ban because we’re dealing with a different kind of asset class because when you outrightly ban it, people will find a way to transact it and there’s nothing you can do about it,” he said.

The backstory

Recently, Nigeria’s National Security Adviser (NSA) classified cryptocurrency trading as a national security issue. Following this, the Central Bank of Nigeria (CBN) directed four fintech startups operating in the country—Opay, Moniepoint, Paga, and Palmpay—to block the accounts of customers engaging in cryptocurrency transactions and to report those transactions to law enforcement agencies.

Earlier in February this year, crypto trading platform, Binance, had to disable its peer-to-peer feature for Nigerian users as it came under the searchlight of the Nigerian government over allegations of currency manipulation and money laundering.

Meanwhile, on Monday, the Nigerian Securities and Exchange Commission (SEC), during a virtual meeting with the Blockchain Industry Coordinating Committee of Nigeria (BICCoN), called for a new cryptocurrency measure that aims to remove the naira as a currency pair from cryptocurrency peer-to-peer platforms.

The Acting Director General of the SEC, Dr. Emomotimi Agama, who made the call, emphasized the need to clean up the virtual assets space from illegal trading activities and safeguard the integrity of the Nigerian capital market. Agama noted that the recent surge in peer-to-peer (P2P) crypto trading has reportedly impacted the Naira’s exchange rate, prompting the SEC to consider delisting the Naira from P2P platforms to curb market manipulation.