By Chinwendu Obienyi
The war against cryptocurrency gangs in Nigeria is raging and the federal government is taking no prisoners in its efforts to sanitise the digital currency ecosystem, especially the cryptocurrency wing.
Leading the onslaught is the Central Bank of Nigeria (CBN) with the security agencies in tow.
While the apex bank acknowledges that cryptocurrency is gaining global traction, it is also aware that it involves encrypting and hiding codes that make oversight, accountability and regulation very difficult.
Hence, the crackdown on cryptocurrency platforms like Binance, who have been accused of launching a manipulative tactics called spoofing to manipulate and distort the foreign exchange market and ultimately send the naira tumbling, has been applauded by experts.
While the CBN notes that there are a number of cryptocurrencies in circulation, the apex bank noted that Bitcoin which was first introduced in 2009, now accounts for about 68 per cent of all cryptocurrencies.
The apex bank further stated that the prohibition of cryptos was not exclusive to Nigeria as certain levels of financial institutions facilitating crypto transactions have been applied in several other countries around the world.
Currently, its war on cryptocurrency has risen more than imagined and hence reflects a broader regulatory concern over illicit financial activities within the digital currency space. Like other countries where it operates, the activities of Binance is being subjected to public scrutiny and this time around in Nigeria. Founded in 2017 by Changpeng Zhao, a developer who had previously created a high-frequency trading software, Binance was initially based in China, then moved to Japan shortly before the Chinese government restricted cryptocurrency companies.
The digital assets platform, serves as a window for peer-to-peer transactions allowing users to advertise interest to sell or buy currencies of their choice. However, the company first found itself in hot water with the Securities and Exchange Commission (SEC) due to its unregistered and allegedly illegal activities involving cryptocurrencies.
The SEC issued a disclaimer against Binance Nigeria Limited, declaring its operations illegal and warning Nigerian investors against engaging with the company’s crypto asset trading platforms.
The statement sighted by Daily Sun read; “Binance Nigeria Limited is neither registered nor regulated by the Commission and its operations in Nigeria are therefore illegal. Any member of the investing public dealing with the entity is doing so at his/her own risk. As the regulator with the statutory mandate of investor protection, the Commission urges Nigerians to be wary of investing in crypto-assets, and crypto-asset related financial products and services if the service provider/its platform is not registered or regulated by the Commission”.
Things literally began to fall apart for Binance Nigeria, when words went round that the cryptocurrency exchange platform working with some local and international syndicates were largely responsible for the FX crisis and the depreciation of the naira in recent times. To make matters worse, some preliminary investigation carried out by the EFCC working with some local and foreign counterparts, uncovered what may have been the highest heist in the country, including money laundering. Amongst other things, Binance Nigeria Limited, it was discovered that despite transacting business in Nigeria in the last seven years, it failed to properly document the business in the country as far as the authorities are concerned.
According to the CBN Governor, Olayemi Cardoso, the company had run transactions valued at over $26 billion with the identities of the businesses unknown.
Things took a twist when two executives of the company who flew into the country from the US as part of moves to negotiate with the Nigerian authorities amid a crackdown on the crypto platform were arrested and detained shortly after they arrived in Abuja even as the government obtained a court order to keep them for 12 days.
The Office of the National Security Adviser (ONSA) later confirmed that the crypto exchange platform, Binance, is being investigated by Nigerian authorities. Zakari Mijinyawa, Head of Strategic Communication at the Office of the National Security Adviser, revealed that apart from Binance, other platforms such as Forextime, OctaFX, Crypto, FXTM, Coinbase, and Kraken, among others, were equally blocked. The Presidency and regulatory sources said the government decided to move against Binance and other crypto firms following reports that currency speculators and money launderers were using them to execute criminal activities.
The CBN further strengthened its resolve on operations of cryptocurrency trade after about four Financial Technology Companies (Fintechs) came under the hammer of the apex bank over allegations that their accounts were being used for illicit foreign exchange transactions. Consequently, the affected Fintechs—OPay, Palmpay, Kuda Bank, and Moniepoint—were barred from onboarding new customers.
Experts react
Although, the CBN’s fight against cryptocurrency has since gotten very harsh reactions on social media with many condemning the policy as a deliberate attempt by the government to impoverish young Nigerians who have been able to create wealth for themselves through crypto-trading.
Former Deputy Governor, CBN, Professor Kingsely Moghalu, described the clampdown as an “unnecessary move”. According to him, there is almost $1 trillion worth of cryptocurrencies in the world, this innovation is a significant form of exchange.
“I know that central banks have never been comfortable with cryptocurrencies but some central banks who had their discomfort, have begun to adapt to it because they recognize their inevitability of innovation. Hence the right to do is to focus on how they can manage it and ensure it does not bring financial ruin”, Moghalu said.
However, iconic American investor, Warren Buffet, described crypto as “rat poison squared, a “mirage,” and a “gambling device” He said, “Yes, cryptos can be used to purchase goods and services but the truth is that because they are supposedly fixed in supply, investors predominantly buy with the expectation that its use and acceptability will rise, thereby ratcheting up its demand and prices”.
Corroborating Buffet, Blockchain expert Jahdiel Chidi agreed but said Nigerians would turn to new crypto exchanges to possibly fill the gap created by Binance’s exit.
Chidi said, “The implication is that people are going to go to other exchanges,” Chidi said, “I mean, there are other options and platforms that you can do the same thing that was obtainable on Binance.”
He urged the Federal government and the CBN to look for better measures in addressing the country’s current foreign exchange challenges.
“I think it was a decision made from the point of hurry without critical investigation into the accusation of Binance’s involvement in certain naira-dollar exchange rates. The main issue that I think they should look at is to focus on the import duty. That’s one of the things that has devalued the naira. Binance just happens to be a victim of wrong decisions by the government.”, Chidi said.