The Nigerian government has shifted its attention to platforms that offer cryptocurrency services as a result of the naira’s sharp depreciation and the nearly three-decade-high inflation rate of 29.9% that followed.
The move by the government to stop trading naira on cryptocurrency exchanges, according to several Nigerian cryptocurrency aficionados, is expected to make things worse for the unstable fiat currency.
Rume Ophi, the executive secretary of the Stakeholders in Blockchain Technology Association of Nigeria (SiBAN), said in a recent interview that it is unrealistic to believe the official Nigerian narrative that international cryptocurrency platforms caused the depreciation of the naira.
Ophi stated that the Nigerian Securities and Exchange Commission (SEC) in 2022 will establish a framework that will allow Nigeria to adequately regulate the cryptocurrency market.
Owing to the naira’s sharp drop and the ensuing nearly three-decade-high inflation rate of 29.9%, the government is concentrating on websites that offer bitcoin services. These websites have gained notoriety for their ability to trade and determine the naira’s informal value.
Iwa Salami, an associate professor at the University of East London, stated that cryptocurrency has been wrongly held responsible for the depreciation of national currencies in a recent opinion post.
Despite its connections to the drug trade and money laundering, she recommended that Nigerian authorities take a moderate regulatory approach rather than outright prohibiting cryptocurrency, as it has never been clearly related to currency devaluation:
“For the business to prosper without jeopardising financial and monetary stability, Nigeria must adopt a balanced approach to regulation. Efficient resource allocation and risk management are possible in a stable financial system. Investors and customers must be safeguarded by the strategy.
Nigeria’s crackdown on bitcoin trading sites has already been covered. The sharp decline in value of the naira earlier in 2024 was attributed by Nigerian officials to these platforms. Nigerian regulators investigated Binance, which has since been charged with a number of offences, including tax evasion allegations.
Salami stressed that regulation, as opposed to prohibition, is a more effective means for Nigerian authorities to achieve their objectives. Authorities can strike a balance between supervision and innovation by requiring cryptocurrency exchanges to disclose the identities of wallet holders linked to questionable activity by utilising the 2022 regulatory framework developed by the Nigerian SEC.
The associate professor claims that international standards for crypto assets, like those recommended by the Financial Stability Board, should be adopted globally in order to promote clarity and consistency in the regulation of crypto asset activities and to provide a unified response to the concerns expressed by Nigerian authorities and other regulators around the world.