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FG bans Binance over depreciating naira

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By Mercy Kelani

There are concerns about crypto usage as avenues for illegal money activities.

Binance, the largest cryptocurrency exchange globally, is ceasing its operations involving Nigeria’s Naira due to heightened government oversight of the crypto industry. Africa’s largest economy introduced limitations on cryptocurrency exchanges in response to the declining value of the domestic currency, leading to the ultimate decision. Last month, Olayemi Cardoso, governor of Nigeria’s central bank, expressed concerns about cryptocurrency exchanges being used as channels for illegal money activities. Cardoso mentioned that there are specific activities occurring, which suggest unlawful transactions passing through several of these organizations.

In the past year, Binance Nigeria has seen a staggering $26 billion flow through its platform from unknown sources and users. Binance’s former leader, Changpeng Zhao, has admitted to breaking money laundering regulations in the United States. Crypto exchanges are being increasingly viewed as a means for individuals to safeguard their funds from the continuous depreciation of the naira. After the naira was floated by the government in May, its value against the dollar dropped significantly from ₦410 to approximately ₦1,600 on the official exchange rate. By the end of February, the black market rate reached ₦1,900 for one US dollar.

Onanuga, accuses Binance of intentionally harming the country’s economy.

Authorities claim that cryptocurrency platforms are manipulating currency values, causing the devaluation of the naira. AFP’s request for comment on the allegations was met with silence from Binance. However, the cryptocurrency company informed its Nigerian customers via email that it would be discontinuing all services involving the naira on March 8. In an email obtained by AFP, the cryptocurrency company stated that only Nigerian Naira services are impacted, but customers can still access services and products for various other cryptocurrencies on offer. Two company executives flying into Nigeria for government negotiations were reportedly detained and had their passports confiscated, as per local media sources.

Also, there hasn’t been official confirmation of the arrests in Nigeria, however, lawmakers are contemplating issuing warrants for the company’s executives due to their failure to respond to invitations. According to Seyi Awojulugbe, a senior analyst at SBM Intelligence, the country’s reputation is expected to suffer due to those detentions. Last month, Binance released a statement on their website refuting any accusations of misconduct. The Nigerian president’s media adviser, Bayo Onanuga, accuses Binance of intentionally harming the country’s economy through manipulation of exchange rates. In February, Onanuga explained to a resident why the government took action against Binance.

Nigerians’ demand for cryptocurrency continued to rise.

Leading up to the February 2023 general election, President Bola Tinubu vowed to create a regulatory atmosphere that would promote the responsible use of digital assets, such as cryptocurrency. Banks were not allowed to facilitate cryptocurrency transactions due to a directive from the Central Bank of Nigeria. In 2021, the bank instructed that all accounts associated with cryptocurrency exchanges be closed. Although banned, Nigerians’ demand for cryptocurrency continued to rise as more individuals turned to peer-to-peer transactions, enabling them to exchange digital assets directly with one another.

According to Chainalysis, a global firm that analyses cryptocurrencies, Nigeria’s ranking on the global crypto adoption index jumped from 11th in 2022 to 2nd place the following year. Months after Tinubu became president, the CBN changed its decision. Following the lifting of the ban, a heightened enforcement effort targeting crypto exchanges commenced within weeks. Regulatory experts emphasized the necessity for a regulatory framework that is more evenly balanced. Aru, the head of policy for Chainalysis in the Middle East and Africa, emphasized the importance of implementing regulatory reforms in Nigeria to accommodate the widespread use of cryptocurrency while addressing the concerns of various stakeholders, ensuring financial stability, and fostering innovation.

Related Article: Officials Urged to Regulate Crypto due to Crime

The International Monetary Fund cautioned that Nigeria’s economy could face obstacles in 2024, with a sluggish naira, rising inflation, and stricter policies posing challenges despite a predicted 3.2 percent GDP growth. Specialists have suggested that the ongoing crackdown on cryptocurrency will exacerbate the existing economic challenges and ultimately compel countless individuals who rely on peer-to-peer methods to exchange digital assets. Ray Youssef, CEO of NoOnes, a peer-to-peer cryptocurrency marketplace, believes that the clampdown will result in Nigeria losing more foreign FX and causing further depreciation of the Naira.

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