Do OTC traders also need a banking license? Nigeria sues traders for manipulating exchange rates for profit

The Nigerian government has filed criminal charges against four cryptocurrency exchanges, alleging that they were operating as financial institutions without the necessary banking licenses.

Cryptocurrency Traders Accused of Manipulating Exchange Rates for Profit

According to a report by Forbes, the Nigerian government has accused four cryptocurrency traders, Ejiogu A. Chinedu, Nnamdi F. Okereke, Oty Ugochukwu Stanley, and Chukwuebuka F. Ogumba, of operating as financial institutions without a valid banking license, in violation of the 2020 Banks and Other Financial Institutions Act.

The Economic and Financial Crimes Commission (EFCC) of Nigeria investigated their activities conducted through multiple bank accounts, alleging that they manipulated the exchange rate of the Nigerian Naira (NGN) using digital asset exchanges and laundered proceeds of crime. The court issued a temporary order to freeze over 100 accounts listed by the EFCC, holding more than 5.486 billion Naira, valued at approximately $330,000.

Do OTC Traders Need Banking Licenses Too?

Forbes suggests that the Nigerian government's lawsuit could set a chilling precedent where individuals providing peer-to-peer (P2P) over-the-counter (OTC) services may require banking licenses to facilitate USDT and Naira trades. Otherwise, based on this case's judgment, engaging in such activities without a license could result in criminal charges if convicted.

Prior to this, ByBit and KuCoin users had $330,000 frozen by Nigeria for allegedly manipulating fiat currencies.

According to Chainalysis data, Nigeria is one of the largest adopters and users of USDT and Bitcoin, and recent actions indicate Nigeria's government stance on forex and cryptocurrency regulation, seeking to prevent economic instability factors and ensure tax compliance through legal means.

Regulation in the Taiwan Market

Taiwan's recent amendments to its Anti-Money Laundering Act specifically include virtual asset service providers, requiring both domestic and foreign currency businesses to register for anti-money laundering compliance, with 26 currently compliant entities. The Financial Supervisory Commission of Taiwan and the Virtual Asset Platform and Exchange Business Association will introduce a self-regulation draft to establish more compliance standards and penalties for Virtual Asset Service Providers (VASPs), with the Financial Supervisory Commission indicating a move towards a registration system that must adhere to specific capital and cybersecurity standards.

Compliant currency businesses can currently offer stablecoin-to-Taiwan Dollar exchange services, but there are no regulations on rates such as USDT/TWD. As most customers on exchanges convert from Taiwanese Dollars to USD stablecoins and then to other cryptocurrencies, exchanges tend to offer higher quotes, requiring users to buy USDT at a higher price to earn more spread.

However, the Foreign Exchange Department under the Central Bank of Taiwan strictly regulates the one-pip spread for banks holding forex licenses on the most commonly used USD to TWD exchange rate for locals. The buy and sell spread for spot exchange rates must not exceed one pip. It is worth noting whether the regulatory authorities will impose stricter rules on exchange rates for VASPs in the future.