Nigeria, Africa’s largest economy, has intensified its efforts to curb speculation on the national currency, the naira, by cracking down on cryptocurrency exchanges as the nation’s economic downturn deteriorates.
The Financial Times reported, citing sources, that two senior executives at Binance, one of the world’s largest cryptocurrency exchanges, have been detained in Nigeria in connection with these regulatory measures.
This development comes shortly after the revelation by Nigeria’s central bank governor, Olayemi Cardoso, that over $26 billion in illegal transactions had flowed through Binance’s crypto platform in the span of a year. The detained executives reportedly flew to Nigeria following the country’s recent ban on several cryptocurrency trading websites.
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According to the sources familiar with the matter, the executives were detained by the office of Nigeria’s national security adviser upon their arrival in the country, with their passports confiscated. While an adviser to the office declined immediate comment, Binance itself refrained from offering any statement on the situation.
Nigerian authorities have shifted their focus to cryptocurrency websites following a significant devaluation of the naira, which contributed to soaring inflation rates. These platforms have emerged as alternative avenues for trading and establishing unofficial exchange rates for the Nigerian currency.
In response to the executives’ detention, Binance halted trading of the naira against bitcoin and tether digital coins on its exchange.
During a press conference on Tuesday, Governor Cardoso highlighted concerns regarding illicit financial flows through crypto exchanges, specifically mentioning Binance.
“We are concerned that certain practices go on that indicate flows, going through a number of these entities and suspicious flows. In the case of Binance, in the last year, $26 billion has passed through Binance Nigeria from sources and users who we cannot identify,” he said.
As part of their investigation into cryptocurrency exchanges, Nigerian authorities, including the anti-corruption agency, police, and national security adviser, are reportedly seeking access to a comprehensive list of Binance’s Nigerian users since its establishment.
Last week, Nigeria’s telecommunications regulator ordered telecoms companies to block access to major cryptocurrency exchanges like Binance, Coinbase, and Kraken. This move reflects the government’s broader efforts to attract foreign investment and stabilize the economy through market-friendly reforms, including currency devaluations.
The situation poses a significant challenge for Binance, which has been grappling with internal reform efforts. In November, the company faced substantial penalties from US authorities for money laundering and violating international sanctions rules. Former CEO Changpeng Zhao pleaded guilty to related charges and resigned from his position.
Bayo Onanuga, a special adviser to President Bola Tinubu, accused Binance of manipulating exchange rates for Nigeria, infringing upon the central bank’s role as the currency rate setter.
The crackdown on cryptocurrency exchanges comes amid broader efforts by Nigerian authorities to address currency speculation and stabilize the national currency, the naira. In addition to targeting digital asset platforms, the CBN has also taken decisive action against Bureau De Change operators, who play a significant role in the foreign exchange market.
In recent weeks, the CBN has implemented stringent measures to rein in BDCs, including suspending the issuance of licenses to new operators and restricting access to foreign exchange for certain transactions. These measures aim to curb currency speculation and illicit financial flows, which have contributed to the devaluation of the naira and soaring inflation rates in Nigeria.
The CBN’s crackdown on BDCs is part of a broader strategy to strengthen the country’s financial system and promote economic stability. By clamping down on currency speculation and illegal financial activities, Nigerian authorities seek to restore confidence in the national currency and create a more conducive environment for sustainable economic growth.
However, the detention of Binance executives and the crackdown on cryptocurrency exchanges raise questions about the regulatory approach to digital asset trading in Nigeria. As the government grapples with the challenges posed by cryptocurrencies, stakeholders emphasize the need for balanced regulation that fosters innovation while mitigating risks.