The Federal Government has resolved to target cryptocurrency to end the continued depreciation of naira in the foreign exchange market.
The world’s biggest cryptocurrency exchange Binance had also announced plans to halt operations in naira as the government puts cryptobusinesses under increasing scrutiny.
The decision came after authorities in Nigeria, Africa’s biggest economy, imposed restrictions on cryptocurrency exchanges as part of attempts to halt the sliding value of the local currency.
The Governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, in February, said cryptocurrency exchanges were conduits for money laundering.
Cardoso singled out Binance as the biggest culprit.
The CBN Governor said: “Certain practices go on that indicate illicit flows going through a number of these entities.
“In the case of Binance, in the last one year alone, $26 billion has passed through Binance Nigeria from sources and users who we cannot adequately identify.”
Changpeng Zhao, who was head of Binance, has pleaded guilty to violating anti-money laundering laws in the United States.
Binance removes naira transactions from platform
With the naira weakening almost daily, crypto exchanges have been seen as one way Nigerians can protect their money against the currency’s plummet.
Since the government floated the naira in May, the currency has fallen from around 410 to the dollar to around N1,600 to the greenback on the official exchange.
In late February, a dollar was exchanged for as much as 1,900 naira on the black market.
Officials have accused crypto exchanges of distorting foreign exchange rates, contributing to the naira’s weakening.
Binance did not immediately respond to AFP’s request for comment on the allegations.
But in an email sent to its Nigerian users, the crypto giant said it was shutting down all its naira-based services on March 8.
“This affects NGN services only, you can continue to make use of services and products for other available cryptocurrencies,” the crypto giant said in the email.
Local media reported that two officials of the company who flew into Nigeria to negotiate with the government were detained and their passports seized.
Nigerian officials have not confirmed those arrests, but lawmakers are also considering issuing arrest warrants for the company’s top executives for “ignoring invitations”.
Those detentions are “likely to negatively affect the country’s reputation,” a senior analyst at Lagos-based risk consultancy firm SBM Intelligence, Seyi Awojulugbe, said.
Binance has denied any wrongdoing in a statement posted on its website last month.
Presidential spokesman, Bayo Onanuga, stressed that Binance was sabotaging the country’s economy by influencing exchange rates.
Onanuga said: “That is why the government moved against Binance.
“Some people sit down using the cyberspace to dictate even our exchange rate, hijacking the role of the CBN.”
In the run-up to the general election in February 2023, President Bola Tinubu promised a regulatory environment to encourage healthy adoption of digital assets, including cryptocurrency.
At the time, a CBN order prohibiting banks from enabling crypto transactions was in place.
The bank had ordered the closure of all accounts linked to cryptocurrency exchanges in 2021.
It feared anonymity around cryptocurrencies could enable money laundering, terrorism financing, and that the high volatility could wipe out investments.
Despite the prohibition, Nigerians’ appetite for cryptocurrency grew with many adopting peer-to-peer transactions, which allow people to trade digital assets among themselves.
Nigeria rose from 11th position in 2022 to second place a year later on a global crypto adoption index, according to Chainalysis, a global cryptocurrency analysis 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.
Despite projecting a modest 3.2 per cent GDP growth for the economy in 2024, the International Monetary Fund (IMF) warned that a weakened naira, inflation, and policy tightening will provide headwinds for Nigeria’s economy.
Experts said the current crypto crackdown will add to the pressure the economy already faces and will force millions of people who use peer-to-peer mechanisms to trade digital assets.
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