Nigeria's National Security Adviser (NSA) is poised to designate crypto trading as a national security risk, indicating an imminent crackdown on peer-to-peer (P2P) crypto transactions, as reported by local media and sources from CryptoSlate.

This move comes after three major Nigerian fintech startups — Moniepoint, Paga, and Palmpay — decided to block accounts engaged in crypto activities and report such transactions to law enforcement.

Moniepoint CEO Tosin Eniolorunda expects the NSA's classification to lead to new regulations prohibiting P2P crypto trading, with an official announcement expected soon.

This marks a significant shift in regulatory approach, particularly after the Bola Tinubu administration had previously shown a more accommodating stance towards crypto. In December 2023, the Central Bank of Nigeria lifted a two-year ban on crypto transactions, indicating a more favorable regulatory environment.

However, recent months have seen a reversal in this trend, with authorities blaming crypto speculators for exacerbating volatility in the foreign exchange (FX) market. The proposed P2P trading ban is based on the Central Bank's assertion that crypto traders exploit this method to manipulate the Nigerian naira through pump-and-dump schemes.

Central Bank Governor Olayemi Cardoso alleged in February 2024 that Binance had facilitated $26 billion in untraceable transactions, leading to a crackdown on the exchange and the freezing of over 1,000 bank accounts linked to P2P transactions.

In a related development, four prominent fintech firms were recently instructed to stop opening new customer accounts, although the source of this directive remains unclear.

Moniepoint's CEO, Tosin Eniolorunda, confirmed that the NSA was behind this move, expressing concerns about the ease with which fintech platforms facilitate account openings, particularly Tier 3 accounts.

While an NSA spokesperson declined to provide further details, this development underscores the increasing scrutiny over the rapid proliferation of accounts facilitated by fintech startups. Traditional banks have long raised concerns that such accounts serve as conduits for illicit funds.

In response to these concerns, the Central Bank amended its rules in December 2023, mandating fintech startups to verify the identities of all account holders by March 2024.

As Nigeria prepares for further regulatory measures in the crypto space, the future of P2P trading remains uncertain amid growing national security concerns and evolving regulatory landscapes.