The fluid space with increased loss of disciplinary boundaries within which cryptocurrencies or digital currencies operate has made them viable tools for forex exchange manipulations and economic sabotage in many economies.
Several countries have come under attack by economic saboteurs leveraging cryptocurrency tools. Even the United States of America isn’t spared.
This is because crypto can be used anonymously to conduct transactions between any account holders worldwide.
Countries like USA, Canada, France, Australia, Japan, Germany, and some other countries have accepted cryptocurrencies’ digital assets but have placed strict regulations to guide their operations.
For instance, in a dramatic turn of events just days ago, a US judge imposed a staggering $4.3 billion fine on Binance as part of a plea agreement linked to allegations of money laundering and violations of sanctions. This clearly shows the devastation cryptocurrencies can cause to an economy and how countries are rising to curtail the excesses of digital assets.
Thus, it clearly shows the CBN is on the right part in trying to effectively regulate digital currencies in Nigeria, especially with evidence linking to forex manipulation in Nigeria. The naira has lost sustained value against major foreign currencies like the USD and British Pound. The loss reached a record $1/N1,800 last week at the BDCs in Abuja.
Sources at the Central Bank of Nigeria (CBN) and financial experts believe the Nigerian currency, the Naira came under sustained manipulation by rent-seekers leveraging the fluid nature of cryptocurrencies on one hand, and through Bureau de Change operators on the other. Some politicians, top government functionaries, and corporate organisations were also reported to have moved their savings to dollars as inflation kept a sustained rise.
Digital assets investors were considered to have made a significant contribution to the fall of the naira. Binance was also fingered for sabotaging the naira.
Recall in September 2023, Nigeria’s Securities and Exchange Commission (SEC) placed a disclaimer on Binance Nigeria Limited, saying the platform was “neither registered nor regulated by the Commission and its operations in Nigeria are therefore illegal”.
FX experts told our correspondent under conditions of anonymity that individuals or groups with significant crypto control, at home and abroad, engaged in spoofing. They would place large buy or sell orders on the online forex platform without intending to execute them. This creates a false illusion of high demand or abundance of forex (pump and dump), influencing others to buy or sell at manipulated prices. Thus, the loss of the naira in quick succession wasn’t necessarily based chiefly on demand and supply. Economic saboteurs went to work.
Financial and economic crime experts said spoofing gives fake value to the dollar against the naira which misleads the FX market in Nigeria. This fake price is then often quoted by BDCs who raise their prices to meet the Binance benchmark even without any corresponding demand in that segment.
Dr. David Akwu, a financial analyst asked some pertinent questions. “This is even a low peak travel period for Nigerians so there isn’t much pressure on FX. So why was the naira falling? Schools abroad weren’t starting new sessions either so the demand for school fees wouldn’t be much at the time. I’m not sure there was also so much need for foreign travel by government officials and even the private sector as the year is just starting. So many entities are struggling with getting their budgets approved at the National Assembly and all that. So where was the demand coming from? The private sector, they are also watching economic realities and would naturally be slow on running costs thus, foreign travel is not an appetite as much. This showed clearly some invincible hands were sabotaging the Naira” he said.
The deceptive practice, preys on the forex market and as in the case of the Naira, has created fear and price depreciation and devaluation of the Naira.
The CBN had previously introduced guidelines on crypto regulations in Nigeria but it wasn’t robust enough to check the excesses of money launderers and forex manipulators.
The CBN had attempted in the past to regulate activities of cryptos but its previous CBN guidelines, while aiming to curb banking involvement with crypto, leave the P2P space largely unsupervised and taken over by unprofessional people profiting to the detriment of the country. Experts agree that regulatory vacuum allows spoofing and other manipulative tactics to flourish in P2P mkt, jeopardizing the integrity of the market and eroding investor confidence.
Therefore, there is a consensus among experts that there is a need to review the existing guidelines to address noticed gaps. The CBN guidelines should be robust enough to enthrone stricter regulatory measures for P2P platforms, robust transaction monitoring systems, and clear penalties for spoofing to deter such activities and foster a safer trading environment.
national security concerns have also been raised against digital platforms as the platforms are often patronised by criminals for money laundering and ransom payments for kidnap victims.
The Office of the National Security Adviser (ONSA) it will work with the CBN to clamp down on currency speculators, economic saboteurs, and criminals. The Head of Strategic Communication at ONSA, Zakari Mijinyawa, said in a press statement that individuals and organisations involved in wrongful activities in Nigeria’s Forex market would be identified, investigated, and penalised.
Therefore, the CBN needs to intervene to protect investors and safeguard Nigeria’s financial stability. The potential of the crypto industry cannot be ignored. However, its growth must be accompanied by responsible regulations. Addressing spoofing and other manipulative practices through a revised regulatory framework is essential to ensure the sustainable and healthy development of Nigeria’s P2P crypto market.
The time for the CBN to act is now.
