Cryptocurrency Crimes in Nigeria: An Overview and Possible Solutions

by Tari Yousuo
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Cryptocurrency crimes.

Cryptocurrencies and blockchain technology have changed the way people manage and transfer money within and outside Nigeria. They have made it possible to send and receive financial assets quickly, safely, and privately across borders. 

However, as with every invention, cryptos and blockchain technology, advantages can empower criminal activity. This article will expose you more to cryptocurrency crimes, and how governments, cybersecurity agencies, and interested individuals are fighting against them.

What are Cryptocurrency Crimes?

Crypto crimes are activities that break the laws of a country and are directly or indirectly aided by cryptocurrencies.

These crimes include theft, fraud, tax evasion, money laundering, and selling illicit goods and services (eg, drugs, kidnapping, child sexual abuse materials, hacking, etc).

For example, a kidnapper asking for a ransom to be paid in cryptocurrency is committing an indirect crypto crime. A hacker stealing people’s crypto assets from their wallet is committing a direct crypto crime.

How Cryptocurrencies Aid Crimes

When Bitcoin, the first cryptocurrency, was released in 2009, it wasn’t intended to be used for criminal activities. But recently, the powerful technology behind Bitcoin has been exploited by various criminals.

The advantages criminals enjoy from cryptocurrencies include:

  1. Fast transactions

Criminals can quickly move money from one country to another by converting it to crypto. This helps them purchase whatever they need like specialized software for hacking accounts, login details, personally identifiable information, etc, and also receive payment for any illegal activity they engage in.

  1. Relative privacy

Although using crypto doesn’t guarantee that your identity will be hidden 100%, it is, however, harder to identify users or brainboxes behind cryptocurrency crimes.

Unlike traditional banking systems that ask for and record the names of the sender and receiver while making transactions, blockchain technology only uses wallet addresses without revealing the identity of the receiver or sender.

It takes special analysis and tech skills to trace and find the owner of a particular wallet address. This layer of privacy and pseudo-anonymity favours cryptocurrency crime instigators as their true identities can be hidden.

  1. Decentralization

Blockchain technology isn’t controlled by any single company or government agency. That means even though there are some cryptocurrency regulations, nobody can impose laws on criminals. They can make unlimited transactions and can move huge amounts of money without queries from anybody.

Their wallets cannot be frozen, and their crypto assets cannot be seized by the government without their cooperation.

  1. Unchangeable transactions

Once funds are sent out from an address, they can’t be reversed. To get it back, the receiver has to willingly transfer funds back to the sender. There’s no backdoor through which an institution, eg, banks, can reverse funds.

This one-way traffic is an added benefit to scammers who can easily run away with people’s money.

Popular Cryptocurrency Crimes

There are many crypto crimes, ranging from fraud and money laundering to using crypto as a means of payment for illegal goods and services.

Here are the most popular crypto crimes:

  1. Crypto theft

Stealing of cryptocurrencies from exchanges and people’s wallets is one of the popular cryptocurrency crimes. But according to Chainalysis, this has reduced over the past year, due to better security measures.

  1. Fraud and crypto scams

Fraud and scams are common in the crypto industry. Recently, Sam Bankman-Fried was sentenced to 25 years in prison for fraudulent acts involving his crypto exchange FTX. He was found to be using customers’ funds from FTX for his private crypto trading firm without their permission.

He also defrauded investors in FTX of amounts exceeding $1.7 billion. Things, however, tumbled when his shady dealings were whispered. Customers and investors started withdrawing funds until FTX couldn’t pay back. Eventually, Sam Bankman-Fried was arrested, taken to court, and judged guilty. Currently, he’s serving jail time.

Another case of widespread crypto scam occurred recently via an airdrop called “IRON.” Usually, before any new cryptocurrency launches, they do what is called “an airdrop,” where they give a portion of the coins away for free after users complete some tasks.

IRON was an airdrop that ran for weeks, promising users rewards up to $100. 

After building up the hype, they required users to pay fees worth over $12 to swap IRON for other coins that can be easily converted to cash. This was a scam all along. After paying the fee, it was taken by the scammers, and no conversion was made.

Weeks later, the true value of IRON was revealed to be $0, after the scammers had swindled away huge sums from the crowd.

  1. Money laundering

Money laundering is one of the most common cryptocurrency crimes. It is the process of integrating money obtained by illegal means into the financial system, to make it look like legitimate funds.

There are different ways people launder money. In the crypto space, the typical way of laundering money is by using a mixer. Coins are sent to a mixer account, which pools cryptos from different sources,  mixes them, and sends them out to recipients. The process makes the source of a particular coin untraceable.

  1. Tax evasion

Every country has their tax laws. But generally, it is a crime to not pay tax following the laws of a country. For years, people have used cryptocurrencies to avoid paying taxes. This has been fairly easy since there are no central authorities monitoring income from cryptos.

  1. Illegal markets

SilkRoadd, founded in 2011 by Ross Ulbricht, was a booming online marketplace before it was shut down by the FBI (Federal Bureau of Investigation) in 2013.

There, they sold all kinds of illegal goods and services, ranging from drugs like cocaine, MDMA (3, 4-methylenedioxymethamphetamine, also known as “molly”) and Ice, to child sexual abuse materials, stolen IDs, and hacking services. The payment was done using Bitcoin, which favoured anonymity.

Another marketplace called “Hydra” was created in 2015, for the sale of similar illegal goods. Hydra has been offline since 2022.

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How Governments and Other Agencies are Fighting Cryptocurrency Crimes

Although cryptocurrencies were created to empower individuals and overcome the dependence on central agencies for sending money across borders, or governments regulating the value of any given currency, this power has been exploited by individuals with ill intentions to carry out their criminal activities.

Governments have always been against the use of cryptocurrencies because it disrupted the financial industry. Some regulatory measures and laws put in place by the governments are:

  1. KYC laws

KYC stands for “Know Your Customer.” Governments and regulatory bodies have made it compulsory for crypto exchanges to implement KYC for all their users. This is to ensure that every crypto address is tied to a real person and help them identify individuals in case of suspected criminal activities.

  1. Anti-money laundering (AML) policies

The anti-money laundering act in Nigeria has been in existence since 2013. Over time, it has evolved to tackle different scenarios and technologies as they arise.

One of the highlights of the anti-money laundering Act is that “transactions exceeding 5 million naira for individuals, and 10 million naira for corporate entities, must be reported and accurately documented. The individual or corporate body must tell the bank the source of funds, and the reason for the transaction.”

  1. Ban on crypto platforms

Some countries have gone as far as placing a complete ban on cryptocurrencies, and anyone caught making crypto transactions is punished. Here in Nigeria, the government has targeted some platforms.

Recently, Binance – one of the largest crypto exchanges, was clamped down by the Nigerian government claiming that it aided tax evasion, money laundering, and terrorist financing. Subsequently, Binance delisted the naira and all naira-related services from their platform.

A Peek into the Future of Cryptocurrency Crimes and Countermeasures

Going forward, it will be a tough battle between governments and centralized financial agencies on one side, fighting against blockchain technology and decentralized finance (DeFi) on the other side.

Governments are seeking to regulate the crypto industry, claiming that it aids many crimes and impacts the economy negatively. While the idea behind blockchain technology and cryptocurrency is to create a market that is not controlled by any central authority, crypto criminals are taking advantage of the purpose. 

Some supporters of cryptocurrency believe that the government’s goal of regulating this space is based on their selfishness, and not necessarily for the good of any nation. It’s debatable whether the government has her citizens’ best interests at heart. However, cryptocurrencies and the blockchain technology enabling the crypto space to function are now an integral part of society. 

Even though it has impacted the financial sector positively, a few individuals have also used it to do their dirty business without detection. Therefore, some form of regulations should be put in place. 

One key factor that will make any regulation widely accepted by the crypto community is ensuring that it does not interfere with people’s privacy. A balance between stopping criminal activities, while maintaining user privacy must be achieved.

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Cryptocurrencies have provided new investment opportunities, new ways of storing assets, and even created jobs and niche markets. But it has also been exploited by thieves, scammers, drug dealers, kidnappers, and terrorists for their criminal activities.

The government wants to regulate the industry, but that goes against the core idea that birthed the industry in the first place. To ensure the safety and detection of criminal activities, there has to be a balance between regulation, and user privacy.

Also, people need to learn more about the crypto industry, how it works, and the dangers of cryptocurrency crimes. This will help them to protect themselves from fraud and huge losses.

Edited by Priscilla Ajayi.

About Author

Tari Yousuo
Tari Yousuo
Tari Yousuo is an SEO specialist and content writer, writing about Tech and IT, Cloud Computing, AI, and Marketing.

When he's not digging deep into tech and the digital world, you can find him absorbing the beauty of nature or playing with poetry.

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