Nigeria's National Security Adviser is planning to categorize crypto trading as a threat to national security, indicating a potential crackdown on peer-to-peer crypto transactions, according to reports from local media sources.

This decision comes after three major Nigerian fintech startups - Moniepoint, Paga, and Palmpay - took steps to block accounts engaged in crypto transactions and report such actions to law enforcement. Moniepoint's CEO mentioned that the NSA's classification is likely to lead to new regulations prohibiting P2P crypto trading, with an official announcement expected soon.

The regulatory outlook is shifting significantly, especially since the previous administration had shown a more tolerant approach towards crypto activities, as evident in the Central Bank of Nigeria lifting a two-year ban on crypto transactions in December 2023.

Now, there has been a change in direction, with authorities attributing the volatility of the foreign exchange market to crypto speculators. The proposed ban on P2P trading is grounded in the Central Bank's claim that crypto traders manipulate the Nigerian naira using pump-and-dump schemes through this method.

In response to alleged untraceable transactions facilitated by Binance, the Central Bank Governor stated that over $26 billion was involved, leading to intense scrutiny and account freezing. Additionally, four major fintech firms were instructed to stop opening new customer accounts, reportedly due to concerns expressed by the NSA regarding account openings facilitated by fintech platforms, particularly Tier 3 accounts.

The growing number of accounts created by fintech startups has raised red flags among traditional banks, with fears that these accounts could be used to move illicit funds. To address this, the Central Bank changed its rules in December 2023, mandating fintech startups to verify all account holders' identities by March 2024.

As Nigeria awaits further regulatory actions in the crypto sector, the future of P2P trading is uncertain amidst rising national security worries and changing regulatory environments.