Nigeria has emerged as a significant player in the global cryptocurrency market. The country has a large and growing user base for digital currencies, with Bitcoin and other altcoins gaining popularity. However, this rapid adoption has raised concerns for regulators.
The CBN has been actively monitoring and regulating cryptocurrency activities. In 2017, the CBN issued a circular warning banks and financial institutions against dealing in virtual currencies. The circular cited risks related to consumer protection, money laundering, and terrorism financing.
The SEC has also taken steps to regulate digital assets. In 2020, the SEC declared that cryptocurrencies and token offerings fall under its regulatory purview. It introduced guidelines for Initial Coin Offerings (ICOs) and digital asset exchanges. The SEC requires crypto exchanges and other platforms to register and obtain licenses. This move aims to enhance investor protection and prevent fraudulent schemes.
This comes after P2P activity was banned by cryptocurrency platform Binance yesterday, February 20, 2024. The lack of USDT buy ads on the site was a complaint voiced by platform users on X.
Recently, the Nigerian government demanded a $10 billion payment from Binance, one of the world’s largest cryptocurrency exchanges. The allegations against Binance include manipulating foreign exchange rates and causing the depreciation of the Nigerian naira. This demand reflects broader efforts by Nigerian authorities to assert control over the crypto industry.
On, February 21, 2024, Binance issued a second statement outlining the reasons behind the platform’s P2P trading suspension. It claimed that when there is a substantial change in currency, its system automatically pauses.
The corporation claims that this functionality was implemented to stop system abuse. It also disclosed that there was a brief suppression that occurred yesterday and that changes were required because it exceeded the system’s limit.
Nonetheless, the exchange started up P2P trading again on its platform on Wednesday, February 21, 2024, in the evening.
Broader Implications on Cryptocurrency
Cryptocurrencies can impact fiat currencies, and authorities want to safeguard the naira’s value. Regulating exchanges like Binance is crucial for maintaining investor confidence. Clamping down on alleged manipulative practices sends a message that the government is serious about protecting citizens.
Nigeria faces the challenge of balancing innovation in the crypto space with the need to mitigate risks. Striking the right balance is essential for sustainable growth.
The role of cryptocurrencies in financial crime
Foreign Exchange Rate Manipulation:
- The Nigerian government claims that Binance manipulated foreign exchange rates through currency speculation and rate-fixing.
- As a result, the Nigerian naira has experienced a significant depreciation, losing nearly 70% of its value in recent months.
Binance’s Role:
- Binance, one of the world’s largest cryptocurrency exchanges, allegedly contributed to the sharp increase in foreign exchange rates.
- The government asserts that Binance’s actions directly impacted the stability of the naira, leading to its devaluation.
Anonymous Accounts and Money Movement:
- After a North Korean hacking group stole virtual currency from a Slovakian crypto exchange, they opened anonymous accounts on Binance.
- Using encrypted email addresses for identification, the hackers swiftly converted the stolen funds through Binance, obscuring the money trail.
- Binance’s lack of knowledge about the individuals moving money through their exchange facilitated this process.
Financial Crime and Allegations on Binance
Foreign Exchange Rate Manipulation:
- The Nigerian government claims that Binance manipulated foreign exchange rates through currency speculation and rate-fixing.
- As a result, the Nigerian naira has experienced a significant depreciation, losing nearly 70% of its value in recent months.
Binance’s Role:
- Binance, one of the world’s largest cryptocurrency exchanges, allegedly contributed to the sharp increase in foreign exchange rates.
- The government asserts that Binance’s actions directly impacted the stability of the naira, leading to its devaluation.
Anonymous Accounts and Money Movement:
- After a North Korean hacking group stole virtual currency from a Slovakian crypto exchange, they opened anonymous accounts on Binance.
- Using encrypted email addresses for identification, the hackers swiftly converted the stolen funds through Binance, obscuring the money trail.
- Binance’s lack of knowledge about the individuals moving money through their exchange facilitated this process.
Laundering of Illicit Funds:
- Cryptocurrencies offer privacy and difficulty in retrieving funds, making them attractive for money laundering.
- Binance reportedly processed transactions totaling at least $2.35 billion stemming from hacks, investment frauds, and illegal drug sales between 2017 and 2021.
- Criminals regularly exploit crypto exchanges for laundering huge sums.
Binance’s Compliance Efforts:
- Binance, like many other crypto exchanges, tracks suspicious behavior as part of its Anti-Money Laundering (AML) compliance.
- The exchange reports such activities to law enforcement agencies to combat illicit flows.
Blockchain Transparency:
- Unlike cash, which is difficult to track, blockchain’s transparency allows law enforcement to uncover and trace money laundering more effectively.
- Binance’s efforts to improve cyber forensics aim to detect illegal crypto activity on its platform.
- Nigeria suspended several cryptocurrency firms, including Binance, in an attempt to halt the naira’s slide.
- The government also closed thousands of bureaux de change to curb foreign-currency trading
According to an EFCC insider who talked with the publication, the platform is manipulating the value of the dollar relative to the naira, calling the operation a “sophisticated heist against the Nigerian economy.”
The source was reportedly informed by a top CBN official that Binance is being used as a “benchmark for currency trading, misleadingly devaluing the Naira in global markets.”
Nonetheless, Binance refuted this in a statement today. It stated: “Binance acts as a P2P marketplace rather than a platform for price discovery. To be clear, it is not meant to serve as a stand-in for currency pricing in Nigeria; rather, it is driven by the market.”
