Nigeria is making new rules to stop people from using financial technology (fintech) to avoid important checks when they buy and sell cryptocurrencies. This is known as KYC, or "Know Your Customer." KYC is a way for banks and other financial companies to check who their customers are. It helps to prevent illegal activities like money laundering and fraud.

To combat this, Nigeria’s central bank wants to make sure that everyone who buys or sells cryptocurrencies follows the KYC rules. These rules require financial companies to check the identity of their customers. This might include asking for identification documents, like a passport or driver’s license, and sometimes proof of address. The goal is to make sure that people are who they say they are and to prevent illegal activities.

But some people have been using fintech companies to get around these rules. Fintech companies offer financial services through technology, often using mobile apps and websites. They have made it easier for people to access financial services, especially those who do not have bank accounts. However, some people are using fintech to buy and sell cryptocurrencies without going through the proper KYC checks.

To stop this, Nigeria’s central bank is now making it harder for fintech companies to onboard new customers without doing proper KYC checks. Onboarding is the process of signing up new customers. The central bank is requiring fintech companies to follow stricter rules to make sure they know who their customers are.

These new rules mean that fintech companies will need to be more careful when they sign up new customers. They will have to check identification documents more thoroughly and make sure that all customers go through the KYC process. If they do not follow these rules, they could face penalties from the central bank.

There are several reasons why Nigeria is making these changes. One reason is to prevent illegal activities. By making sure that everyone who buys and sells cryptocurrencies goes through KYC checks, it is harder for criminals to use cryptocurrencies to hide their activities. This helps to protect the financial system and make it safer for everyone.

Another reason is to increase trust in the financial system. When people know that financial companies are following the rules and checking who their customers are, they feel more confident using those services. This can help more people to use fintech and other financial services, which can be good for the economy.

However, these new rules might also have some challenges. For example, some people might find it harder to access financial services if they do not have the necessary identification documents. This could be a problem for people in remote areas or those who do not have easy access to government services. The central bank will need to find ways to help these people while still making sure that KYC rules are followed.

Fintech companies will also need to invest in better technology and training to follow the new rules. This might be costly and could take time to implement. But in the long run, it will help to create a safer and more reliable financial system.