Exchanges in Nigeria to Take Measures Against Crypto Scams

Richard M. March 15, 2021 4 minute read

Nigerian cryptocurrency industry is to take strong measures to guarantee a safe trading environment for crypto exchanges. This is especially for investors with improved security protocols. The Central Bank of Nigeria (CBN), the country’s regulator, has placed pressure on the industry stakeholders to control criminal activities such as fraudulent transactions. The regulators are concerned over the precarious nature of the market and the risks it entails for the investors. The Central Bank of Nigeria has recently put restrictions on financial services regarding crypto transactions in the jurisdiction.

The market has known to be linked to criminal activities. This is a reality that must be dealt with strong measures. Nigeria is making efforts to ensure that the country is not considered a safe haven for illicit financial flow, fraudulent transactions, and terrorism funding.

Most of the crypto exchanges in the country are self-regulating their operations. In the context of crypto exchanges, self-regulation means the development of regulations and a code of conduct for the participant of the market to work with businesses. The regulations include Know Your Customer (KYC) and taking transparency measures to guarantee the protection from hacks.

Luno, one of the crypto businesses, notes, “We are now required to comply with Anti-Money Laundering (AML) and Countering the Financing of Terrorism (CFT) legislation in several of the countries we operate in. Where that’s not yet the case, we have clear guidance from the Financial Action Task Force (FATF) to measure our approach.”

Another crypto exchange says, their users are required to submit a government-issued ID document and pass a 3D liveness test for registering with them. The guidelines most of the crypto-exchanges are using are in alignment with the recommendations by the International Organisation of Securities Commissions (IOSCO). The suggestions contain information sharing and coordination.

However, even after the pressure by the regulators, the country’s Vice President Yemi Osinbajo has given his full support to the crypto market in Nigeria.

“Cryptocurrencies in the coming years will challenge traditional banking, including reserve banking, in ways that we cannot yet imagine, so we need to be prepared for that seismic shift,” Osinbajo said in a video posted recently on his official Twitter handle.

Osinbajo also indicated that the regulators of the country are acting under fear than with knowledge by putting limitations on financial services regarding the crypto market. The VP also suggested that the most practical approach would be to impose robust regulations as enforcing a total ban will be impossible.