- Binance is facing significant regulatory hurdles in Nigeria.
- Nigerian Authorities maintain that they are stopping economic sabotage.
- Detractors of the recent crackdown contend that the government is simply employing a classic misdirection strategy to hide its failings.
Unlike other developing nations like El Salvador, Brazil, and even the Central African Republic that have adopted crypto-friendly stances, the Nigerian government has always had a topsy-turvy relationship with the crypto sector.
After seemingly softening its stance on the nascent market in December 2023 by lifting a ban that prevented banks from facilitating crypto transactions, the sector is again in the cross-hairs of Nigerian authorities. This time, Binance‘s activities have taken center stage as the country grapples with worsening economic conditions marked by high inflation and the devaluation of the naira.
Amid escalating tensions, Nigerian authorities have reportedly detained two Binance executives as part of a hunt for data on the exchange’s customers. What Could be driving the intensifying crackdown?
Binance in the Eye of a Tropical Storm
Over the past 24 hours, reports have surfaced that the office of the Nigerian National Security Adviser has detained two Binance executives who had arrived in Nigeria earlier in the week to negotiate with the government amid rising tensions.
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According to local news outlet PREMIUM TIMES, which cited sources familiar with the matter, the arrest came as negotiations broke down after the executives, whose identities have yet to be confirmed, refused to discuss sharing Binance user details and transaction data outside their embassies. One of the executives is believed to be of American descent, while the other is believed to be British-Pakistani.
The government has reportedly obtained a warrant to detain them for at least 12 days, though the legal ground for this warrant remains unclear.
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Neither Binance nor the Nigerian Economic and Financial Crimes Commission (EFCC), which has reportedly taken over the investigation, immediately returned a DailyCoin request for comment.
The hunt for Binance customer details has heightened uncertainty amongst crypto users in the country, some of whom fear the possibility of a mass arrest.
The recent arrests mark the latest salvo in an escalating crackdown that has seen the Nigerian government direct telecommunication providers to block crypto exchange websites and culminated in Binance shutting down its naira peer-to-peer (p2p) marketplace on Wednesday, February 28.
A Move to Stop Economic Sabotage?
Over the past week, Nigerian authorities have accused Binance of facilitating the devaluation of the naira. These allegations came as the currency traded at an all-time low of 1,900 against the dollar.
According to authorities, the Binance p2p marketplace afforded bad actors an avenue to wash trade the USDT-NGN pair through fake buy-and-sell orders to crash the price of the naira for personal gain. Per regulators, this price speculation created a market-wide effect.
"If we don't clamp down on Binance, Binance will destroy the economy of this country. They just fix the rate," Presidential aide Bayo recently railed on a local news show.
Meanwhile, in addition to currency manipulation, the government has also accused the exchange of facilitating the illicit flow of funds. At a press conference on Tuesday, February 27, the country’s central bank Governor, Olayemi Cardoso, estimated the flow of illegal funds in the past year to be around $26 billion.
"In the case of Binance, in the last one year alone, $26 billion has passed through 'Binance Nigeria' from sources and users who we cannot adequately identify," he asserted.
The recent Binance crackdown has elicited mixed reactions among Nigeria’s predominantly young population.
A Justified Crusade or Scapegoating?
Some believe the crackdown on Binance may be justified, citing the company’s strained relationship with regulators in other jurisdictions like the U.S. and the firm’s failure to pursue registration before servicing Nigerian users.
However, others believe that amid continued corruption, worsening security challenges, and unreliable amenities like electricity, the current administration is only trying to shift blame for economic failings that have quickly made it unpopular with the masses.
"This inability to look inwards, to take corrective action, to blame others, that's the problem," Certified Financial Education Instructor Kalu Aja recently wrote in response to the crackdown.
In the wake of the recent crackdown, crypto users have been forced to find alternatives, including taking trading activity to messaging platforms like WhatsApp and Telegram. This removes the escrow role provided by exchanges, which serves as a layer of security for traders while also increasing the chances of predatory rates.
Several Nigerians have turned to crypto, particularly U.S. dollar-pegged stablecoins, to receive remittances and preserve their wealth amid unchecked inflation.
On the Flipside
- Aside from Binance, the Nigerian government has also blocked access to websites of other popular exchanges like KuCoin and Coinbase.
- Binance does not offer a p2p marketplace for the NGN alone. The exchange also provides a USDT-paired market for currencies like the Ghanaian cedi.
- In June 2023, the Nigerian SEC issued a cease and desist order against Binance Nigeria Limited. Further investigation later revealed that this entity had no ties to the international exchange. As with web domains, a user had registered the business name in Nigeria in hopes of later selling it to the exchange.
Why This Matters
The troubles faced by Binance in Nigeria highlight the regulatory uncertainties facing the industry globally.
Read this for more on the Binance-Nigeria situation:
Binance Risks Nigerian Ban as P2P Saga Escalates
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