Nigerian crypto investors using peer-to-peer (P2P) services have expressed concern about the Central Bank of Nigeria (CBN) flagging their bank accounts.
Nigerian central bank takes action against P2P users
It is speculated that CBN’s decision to flag accounts is related to the Flutterwave hack that cost nearly $5.8 million (2.9 billion nairas). The bank accounts have potential ties to the hackers.
According to local news sources Albert Onimole, legal advisor to Flutterwave, a Nigerian fintech company, reportedly reported a case on February 19, 2023. This was reported to the deputy commissioner of police in Yaba and involved nearly €6 million (3 billion nairas) that had been illegally transferred from his client’s accounts.
On February 27, a motion ex-parte was filed and granted in support of Flutterwave’s claims. According to the motion, 107 accounts will be placed under lien/Post-No-Debit (PND). So far, some local residents have confirmed that their accounts have been frozen in connection with the hack.
The situation has discouraged several P2P users from trading through various over-the-counter (OTC) markets. These markets allow two parties to trade securities outside of formal exchanges. This also happens without the supervision of a stock exchange regulator. The hacked amount flowed into the Nigerian crypto market on various OTCs. As a result, users now face problems with financial intermediaries when they want to use P2P services for crypto transfers.
Investors worldwide use P2P as a medium for direct exchange of crypto between parties without the intervention of a central authority. They can choose to trade cryptocurrencies for cryptocurrencies or crypto for cash. In 2021, the CBN announced regulations that prevented financial institutions such as banks from enabling crypto use. However, Nigerians managed to get around it and maintain their leading position as Africa’s largest crypto hub through the use of P2P platforms.
Situation may collapse some companies
Some members of the community believe that this may affect the general interest of Nigerians who have yet to embark on the digital crypto ecosystem when acquiring digital assets.
A concerned Nigerian stated that the situation is causing some businesses to collapse. This is because unsuspecting entrepreneurs have been receiving payments for their services using funds allegedly linked to the hacked amount. This led to confusion and may have legal ramifications.
Despite strict crypto regulation by the CBN, the P2P marketplace has helped Nigerian commerce. However, a financial analyst known as Sadeik calls it a black market hub for scammers laundering fraud funds. Sadeik further said that a friend of his lost more than 500,000. This was because the account of the person he was doing business with was flagged in the Flutterwave hack.
Flutterwave denies hack
In an official declaration Flutterwave denied the hack. The company said it identified an unusual trend of transactions on some users’ profiles. Furthermore, Flutterwave said it has immediately initiated a review in accordance with standard operating procedure. It revealed that some users had not activated certain recommended security settings and may be sensitive. The statement adds that Flutterwave was able to address the issue before harm was done to users.