CBN Orders Fintech Companies to Halt New Accounts

The Central Bank of Nigeria (CBN) has ordered four leading fintech companies to stop creating new customer accounts, citing concerns over their potential misuse by cryptocurrency traders. This move comes as Nigerian authorities intensify their crackdown on crypto-related activities, which they believe are contributing to the nation’s currency decline.

The fintech firms affected by this directive are Moniepoint, Palmpay, Opay, and Kuda. According to a report by Techcabal, the CBN’s directive was issued shortly after the Economic and Financial Crimes Commission (EFCC), Nigeria’s anti-corruption agency, froze more than 1,140 bank accounts allegedly linked to illegal foreign transactions.

An executive from one of the fintech companies, who wished to remain anonymous, stated that the account freeze is temporary and is linked to an ongoing audit of the Know Your Customer (KYC) processes of these firms. The source suggested that the CBN’s directive is part of broader efforts to clamp down on activities that may be affecting the stability of the Nigerian currency, the naira.

Another anonymous source mentioned that the CBN and Nigeria’s National Security Agency had engaged the four fintech firms prior to issuing the directive. “The CBN feels that many crypto traders were using the fintech platforms to disrupt the FX market. While the banks have a better relationship with the regulator, fintechs still need to establish that type of connection,” the source explained.

This recent action by the CBN underscores Nigeria’s evolving stance on cryptocurrency and its impact on the national economy. After rescinding a 2021 directive that was seen as restrictive to cryptocurrency operations, the CBN has now shifted its focus to fintech platforms that it suspects may be enabling illicit financial activities.

The EFCC’s analysis of the frozen accounts indicated that only 10% were operated by fintech firms, with the majority linked to commercial banks. Despite this, the CBN’s directive appears to reflect the regulator’s cautious approach to fintech firms, particularly those that have yet to build strong relationships with regulatory authorities.

While the current freeze on new accounts may cause inconvenience for users, industry insiders believe that the directive is temporary and that once the KYC audits are complete, normal operations may resume. The affected fintech companies are likely to work closely with regulators to ensure compliance and rebuild their standing with the CBN.