Source: AFP
The world’s largest cryptocurrency exchange, Binance, is halting operations on the Nigerian naira currency as the government places cryptocurrency businesses under increasing scrutiny.
The decision came after authorities in Africa’s largest economy imposed restrictions on cryptocurrency exchanges as part of efforts to stop the sliding value of the local currency.
Nigeria’s central bank governor Olayemi Cardoso said late last month that cryptocurrency exchanges were conduits for money laundering.
He singled out Binance as the biggest culprit.
“There are some ongoing practices that indicate illegal flows are going through a number of these entities,” Cardoso said.
“In the case of Binance, in the last one year alone, $26 billion has flown through Binance Nigeria from sources and users we cannot adequately identify.”
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Changpeng Zhao, who headed Binance, pleaded guilty to violating anti-money laundering laws in the United States.
With the naira weakening almost daily, crypto exchanges are seen as a way for Nigerians to protect their money from the currency’s fall.
Since the government introduced the naira in May, the currency has fallen from about 410 to the dollar to about 1,600 naira to the dollar on the official exchange.
At the end of February, one dollar was exchanged for 1,900 naira on the black market.
Officials have blamed cryptocurrency exchanges for distorting exchange rates, helping to weaken the naira.
Binance did not immediately respond to AFP’s request for comment on the allegations.
But in an email sent to its Nigerian users, the cryptocurrency giant said it will shut down all its Naira-based services on March 8.
“This only affects NGN services, you can continue to use services and products for other available cryptocurrencies,” the cryptocurrency giant said in the email seen by AFP, referring to the naira trading symbol NGN.
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Local media reported that two company executives who flew to Nigeria to negotiate with the government were arrested and their passports confiscated.
Nigerian officials have not confirmed these arrests, but lawmakers are also considering issuing arrest warrants for the company’s top executives for “ignoring invitations.”
These detentions “are likely to adversely affect the country’s reputation,” said Seyi Awojulugbe, senior analyst at Lagos-based risk consultancy SBM Intelligence.
Binance has denied any wrongdoing in a statement posted on its website last month.
“Economic Sabotage”
Bayo Onanuga, the Nigerian president’s media adviser, insists that Binance is sabotaging the country’s economy by affecting exchange rates.
“That’s why the government moved against Binance,” Onanuga told a local television network in February.
“Some are sitting using cyberspace to even dictate our exchange rate, violating the role of the CBN (Central Bank of Nigeria).”
Onanuga did not respond to AFP’s request for comment.
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Ahead of the February 2023 general elections, President Bola Tinubu has promised a regulatory environment to encourage healthy adoption of digital assets, including cryptocurrencies.
At the time, there was an order by the Central Bank of Nigeria that prohibited banks from enabling crypto transactions.
Source: AFP
The bank had ordered the closure of all accounts linked to cryptocurrency exchanges in 2021.
He feared that the anonymity surrounding cryptocurrencies could enable money laundering, terrorist financing, and that high volatility could wipe out investment.
Despite the ban, Nigerians’ appetite for cryptocurrencies grew as many adopted peer-to-peer transactions, which allow people to trade digital assets with each other.
Nigeria rose from 11th place in 2022 to second place a year later in a global cryptocurrency adoption index, according to Chainalysis, a global cryptocurrency analytics firm.
The CBN reversed its decision months after Tinubu was sworn in as president.
But a more intense crackdown on crypto exchanges began weeks after the ban was lifted.
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Experts said a more balanced regulatory approach was needed.
“The high adoption of cryptocurrency in Nigeria highlights the need for clear regulatory reforms that strike a balance between safeguarding the interests of all stakeholders, maintaining financial stability and promoting innovation,” said Arushi Goel, Head of Policy, Middle East and Africa in Chainalysis. , he told AFP.
Despite forecasting a modest 3.2% GDP growth for the economy in 2024, the International Monetary Fund has warned that the weakening naira, inflation and policy tightening will create headwinds for the Nigerian economy.
Experts said the current crackdown on cryptocurrencies will add to the pressure already facing the economy and force millions of people using peer-to-peer mechanisms to trade digital assets.
“The crackdown will starve Nigeria of more foreign FX and further plunge the Naira into a loss,” said Ray Youssef, CEO of NoOnes, a peer-to-peer cryptocurrency marketplace.
Source: AFP