Breaking News: Binance fined $10 billion

On March 1, 2024, according to the BBC, the Nigerian government demanded that Binance pay at least $10 billion in compensation.

The request comes amid a crackdown on cryptocurrency exchanges in Nigeria and a devaluation of the local currency.

Nigeria has accused Binance of profiting from “illegal transactions” in the country. Binance is currently under investigation in Nigeria, and Binance executives were detained in Nigeria earlier this week.

On the same day, crypto exchange Binance removed the Nigerian currency, the Naira, from its peer-to-peer (P2P) feature. Binance users in Nigeria complained on the social platform X and expressed concerns about its development.

Binance’s removal of the naira from its P2P marketplace comes as Nigerian authorities claim that the platform has caused the naira to depreciate. Bayo Onanuga, an adviser to Nigeria’s president, previously said that Binance will destroy the Nigerian economy if it is not stopped because of its arbitrary fixing of foreign exchange rates.

Due to the rapid decline of the naira and the resulting 30-year high inflation of 29.9%, the government has turned its focus to platforms that provide cryptocurrency services because these websites trade and establish the informal value of the naira.

Nigerian crypto users earlier reported difficulty accessing crypto exchange websites, including Binance, OctaFX, etc. A few days later, Binance placed limits on the selling price of USDT on the P2P platform, preventing traders from selling USDT at prices above 1,802 naira per USDT.

Try to ban

On May 1, 2023, Bloomberg reported that Abdulkadir Abbas, director of securities and investment services at the Nigerian Securities and Exchange Commission, said in an interview that the agency is considering allowing the issuance of tokens backed by assets such as equity and debt, but not "cryptocurrencies," on licensed digital exchanges.

On June 10, 2023, the Nigerian Securities and Exchange Commission (SEC) officially announced that it had noticed a website operated by Binance Nigeria Limited, which is not registered or regulated by the Commission, and therefore its business in Nigeria is illegal.

Any member of the investing public dealing with this entity does so at their own risk. The Notice hereby directs Binance Nigeria Limited to immediately cease any form of solicitation of Nigerian investors.

Subsequently, on July 31, 2023, the Nigerian securities regulator issued another warning, reiterating that Binance’s activities in Nigeria were neither registered nor regulated by the Commission, and therefore its business in Nigeria was illegal.

The regulator also pointed out that any member of the investing public who deals with this entity and conducts such solicitations does so at their own risk. The notice reiterated that all platform providers who conduct such solicitations should immediately cease soliciting Nigerian investors in any form.

On August 9, 2023, the Association of Money Exchange Operators of Nigeria (ABCON) called on the federal government to ban Binance from operating in the country to strengthen the Naira exchange rate. Previously, the association regarded Binance as one of the main factors putting pressure on the Naira exchange rate.

On January 3, 2024, the Central Bank of Nigeria issued its first guidelines for banks to open cryptocurrency accounts, while retaining a ban on banks holding or trading virtual assets in their own names.

The move, detailed on the central bank’s website, is aimed at regulating virtual asset service providers in response to global trends and a surge in cryptocurrency adoption in Nigeria. Notably, these accounts are limited to naira-based transactions, cash withdrawals are not possible, and the frequency of withdrawals is limited.

Formal ban

On February 22, 2024, the Nigerian government has instructed its telecommunications companies to block access to cryptocurrency exchanges including Binance, OctaFX and Coinbase, reflecting the global regulatory challenges facing digital asset platforms.

The move comes months after the Central Bank of Nigeria lifted its ban on crypto trading in December 2023, highlighting the shaky regulatory environment for digital assets in Nigeria.

Then, Nigeria's Central Bank Governor Olayemi Cardoso said that $26 billion worth of untraceable funds flowed through Binance Nigeria last year. Nigeria is facing a foreign exchange crisis and is looking for ways to limit capital outflows as the local currency, the naira, hit a record low on Wednesday. In addition to measures such as imposing taxes on foreign workers, calls to restrict cryptocurrencies in the country have recently made headlines again, with reports that local users are blocked from accessing certain crypto exchanges, including Binance.

Last year, the country’s securities regulator warned that the activities of Binance and an entity called Binance Nigeria Ltd. were illegal.

According to local news site Nairametrics, the Central Bank of Nigeria is working with various government agencies and the police to further investigate these fund flows.

In addition, according to the Financial Times, two senior executives of Binance were detained in Nigeria. People familiar with the matter revealed that after Nigeria decided to ban multiple cryptocurrency trading sites last week, these executives flew to Nigeria, but they were detained by the country’s National Security Advisor’s Office and their passports were confiscated.

Final Thoughts

It can be said that Binance is one of the largest cryptocurrency exchanges in the world, but in Nigeria, it has encountered unprecedented difficulties.

Since March 1, 2024, the Nigerian government has taken a series of tough measures against Binance, including requiring it to pay at least $10 billion in compensation, accusing it of profiting from "illegal transactions" in the country, and blocking its websites and services in the country.

Nigeria is Africa’s largest economy and one of the countries with the highest cryptocurrency adoption rates in the world. However, the country’s currency, the naira, has been falling over the past few years, leading to soaring inflation and foreign exchange shortages.

For Nigerian authorities, cryptocurrency exchanges are one of the main reasons for the depreciation of the naira as they provide a channel to bypass the official exchange rate while also threatening the country’s financial stability and security.