Binance crackdown raises fresh concerns in crypto-crazy Nigeria

Nigeria’s crackdown on Binance has raised concerns over the future of cryptocurrency in the country.

The concerns follow a series of government moves targeted at the crypto platform over the last two weeks. Last week, Nigeria asked its telecommunications firms to restrict access to the websites of crypto firms.

Later, it asked Binance and others to disable USDT trades in naira. Currently, the Binance Peer-To-Peer (P2P) market is unavailable to Nigerians. On Wednesday, news broke that the two of the firm’s executives had been detained.

The two executives had flown to Nigeria following the country’s recent restriction on several cryptocurrency trading websites, but the office of the country’s national security adviser detained them and seized their passports.

Earlier on Tuesday, Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), revealed that $26 billion flowed through Binance Nigeria in one year from sources and users the apex bank could not identify.

He confirmed an ongoing collaboration by different agencies, including the Police, the Economic and Financial Crimes Commission (EFCC), and the Office of the National Security Adviser (ONSA), to clamp down on economic saboteurs.

“Suffice to say that we are determined to do everything it takes to ensure that we take charge of our market and not allow others to manipulate it… We will not accept it and will do everything possible to prevent any infraction,” he declared.

Cardoso’s statement and the country’s actions have been met with mixed reactions, with trade volumes falling as apprehension gripped the crypto industry. One industry expert said anonymously: “We don’t know if the authorities are after just Binance or the industry. They have not said anything yet.”

Industry players who spoke to BusinessDay said they are having to relive the nightmare of 2021, when the country first banned crypto transactions.

“People are not trading as they used to. Most platforms have also disabled the ability to trade naira and USDT. It is affecting the whole industry just like it did in 2021. We want to know if the government is anti-Binance or anti-crypto. Because they have not said so. Binance P2P is not working. Now they are showing us ‘pepper’,” a crypto trader who only identified himself as Korede said.

Unlike 2021, where the CBN headed the clampdown on crypto, sources familiar with the matter said the current move is more of an ONSA-led investigation. “The CBN is not fighting with Binance. It is the ONSA and Binance that have an issue,” one source said.

Before now, the crypto firm had said it was willingly working with Nigerian regulators and policymakers. “We continue to actively engage with regulators, policymakers and other relevant stakeholders to foster an open, transparent dialogue about managing the evolving landscape of cryptocurrency and financial markets,” it said in a message to its customers.

Chimezie Chuta, founder and coordinator of Blockchain Nigeria User Group, told BusinessDay that Binance has been found complicit in a couple of transactions that have raised national security red flags to the authorities.

While kicking against the government’s handling of the case, mainly since the crypto firm has acted in good faith regarding the investigation, he said: “An unregulated space is one of the most dangerous spaces out there. There is no way you can tell the difference between funny actors and sincere actors.”

He said the “average crypto trader was not at risk.”

According to reports, Nigeria wants Binance to disclose a list of its Nigerian users since it began operations in the country. Other sources confirm that the crackdown on Binance might be connected with how some people use the platform to fund crimes and launder money.

The reports reveal that the latest crackdown on crypto platforms followed a study by the Nigerian Financial Intelligence Unit, which indicted them as tools for terrorism financing and other criminal activities.

Binance has been investigated a couple of times around the world. In November, it paid $4.3 billion in penalties to US authorities after pleading guilty to criminal charges related to money laundering and violating international sanctions rules.

The global value of illicit crypto activities totalled $24.2 billion in 2023, Chainalysis recently disclosed. The blockchain firm said online crypto platforms were increasingly used for illicit transactions, including money laundering. It revealed that the amount laundered through crypto totalled $22.2 billion last year.

Nigeria is one of the largest P2P crypto markets in the world, and between July 2022 and June 2023, crypto transactions reached $56.7 billion, Chainalysis said.

The growth in P2P transactions has been helped by bans on digital assets in places like Nigeria. Following Nigeria’s February ban on crypto transactions, Binance reported a 2,228.21 percent increase in P2P users on its platform and a 386.93 percent increase in P2P volumes across Africa.

While uncertainty clouds the future of the crypto industry, many traders are already exploring other platforms, including Telegram, to continue their P2P transactions.