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Nigeria's Central Bank Halts Fintech Accounts to Combat Crypto Trading

The Central Bank of Nigeria (CBN) has instructed four fintech companies to stop creating new accounts. This order is aimed at crypto traders suspected of harming the currency’s value. The companies impacted by this move are Moniepoint, Palmpay, Opay, and Kuda.

CBN’s directive targets fintechs

Techcabal reports that the Central Bank of Nigeria issued its directive soon after the Economic and Financial Crimes Commission (EFCC), the country’s agency against corruption, froze more than 1,140 bank accounts linked to illegal transactions abroad.

The report includes a statement from a fintech company implying that this account freeze is only temporary.

An anonymous executive from a fintech firm confirmed the temporary suspension, linking it to a current review of the KYC procedures in these firms.

Another unnamed source noted that the CBN and Nigeria’s National Security Agency had discussions with the affected firms before issuing the directive.

One more source revealed that the Nigeria’s Central Bank views many cryptocurrency traders as potential risks to the stability of the foreign exchange market. It also hinted that banks have a better relationship with the regulator than fintech firms, who are still building their reputation and trust with the CBN.

The CBN is now pointing fingers at cryptocurrency traders for the fall of the domestic currency. Binance, a well-known trading platform, has been singled out by Nigerian authorities, accusing it of causing an outflow of over $26bn from the economy.

Despite the Nigerian currency, the naira, continuing to grapple against key global currencies, Nigerian officials have now turned their focus to cryptocurrency exchanges as well as fintech companies. A recent examination by the EFCC found that just 10% of the frozen accounts belonged to fintech firms, while the rest were linked to commercial banks.

Nigeria demands $10bn from Binance

Nigeria’s government is demanding a hefty sum of nearly $10bn from Binance, a well-known cryptocurrency firm. The authorities claim that Binance has played a role in manipulating foreign exchange rates, contributing to a drastic drop in the value of Nigeria’s currency, the naira, in recent months.

Two executives from Binance were taken into custody in Nigeria. Binance has yet to respond to inquiries. As Africa’s leading economy, Nigeria also ranks as one of the largest global markets for cryptocurrency.

Olayemi Cardoso, the governor of Nigeria’s central bank, made claims that Binance Nigeria transferred $26bn in untraceable funds. Tilewa Adebajo of CFG Advisory addressed this issue, indicating that the allegations were serious.

He highlighted the magnitude of the situation, stating that the alleged figure was even higher than the annual remittances of $24bn that Nigeria receives from its diaspora. He further emphasized that the government must have conducted a substantial investigation before making such allegations.

According to Reuters, the value of cryptocurrency transactions in Nigeria was approximately 12 percent of the country’s total earnings, or GDP, in the year up until June 2023.

Cryptocurrencies are allowed in Nigeria, but the government requires companies to register first. Binance, a major player in the crypto industry, didn’t follow this rule, according to Nigeria’s presidential advisor.

Nigeria’s president implemented a policy allowing traders to buy and sell the naira at market-determined rates upon assuming office last year. However, not all agree that the recent crash was a mere result of economic forces. Special advisor Bayo Onanuga shared his views.

He pointed out that in an abrupt course of events, the exchange rate skyrocketed. Onanuga attributed this dramatic shift to traders on the Binance platform. Concerning government response, he firmly believed that the government could not simply watch the situation unfold passively.

Several leading cryptocurrency platforms like Binance, Coinbase, Kraken, Forextime, OctaFX, Crypto, and FXTM are currently banned in Nigeria. This comes as a shock to many Nigerians who use these platforms frequently. This move aims to balance the weakening naira.