First of all, let me start by asking you these questions; is Binance to be blamed for the naira free fall? Will clamping down on crypto exchanges and platforms put an end to P2P trade in Nigeria?
Hello guys! In this article, I will highlight in-depth stories about the clash going on between the world largest cryptocurrency exchange - Binance and the Nigerian Apex Bank - CBN on alleged FX manipulations in the country.
In 2021 February 5, the Central Bank of Nigeria (CBN) banned the use of naira for bitcoin and crypto-related transactions. The ban was lifted in December 22, 2023. CBN said in the circular sent to financial institutions and banks that the crypto ban was lifted due to current global trends that have shown that there's a need to regulate the activities of crypto companies.
During the time CBN lifted ban on Cryptocurrency in Nigeria, every investors and traders were happy, not knowing that the Apex bank is going to be bring up another drama before the month ends. In another ironic turn of events, CBN launched another ban on Crypto in February 20, 2024, citing that crypto P2P trading markets are manipulating FX rate and causing naira to depreciate against the United States Dollar (USD).
Due to the recent crypto ban, Binance P2P related to naira-to-dollar fiat currency is suspended. When the buy and sell features were first dismissed on Binance platform, traders and investors thought that it's caused by the scarcity of USDT. But as the matter begin to gain popularity, their best guess was that more people were starting to save USDT as the naira is in a free fall.
However, this is true. People dived back to Binance to begin saving in USDT as naira fall freely against dollar and Nigeria Economy is no where to be found. Hence, Binance had to stop its naira-to-usdt buy and sell features on its P2P market.
Binance said in a statement that "temporary suppression that reached its system limit and automatically stopped people from conducting USDT trade." The crypto exchange also made it cleared that its teams are working with Nigeria authorities to resolve the issues.
CBN, Cease Fire!
Not only Binance were affected, major Crypto platforms, exchanges and apps like Kraken, Coinbase and Quidax were also hit by the fire released by CBN. Infact, CBN in hand with FG instructed Nigerian Communications Commission (NCC) to restrict access to crypto websites in the country through telecommunication networks.
At that time, many users confirmed that binance.com, Quidax, Coinbase and more via their apps and web were no longer accessible on Airtel and MTN networks. Although, Binance was the major target of the FG, others were just hit by the Fire.
The Office of the National Security Adviser (NSA) has started investigation by detaining two Binance Executives that flew into Nigeria to resolve the issue and also slammed a $10 billion fine on the exchange the same day.
Although FG has denied this information, perhaps, because the Binance has profited from illegal transactions of naira to dollar in the country.
What Authorities are saying
An undisclosed Insider from Economic and Financial Crime Commission (EFCC) told press that Binance P2P is adding value to dollar against naira. The source describe the act as a "sophisticated heist against the Nigerian economy."
Another source from the office of CBN also cited that Binance P2P is being used by Nigerians as a "benchmark for currency trading, misleadingly devaluing the Naira in Foreign Exchange Market."
The CBN Governor - Olayemi Cardoso has also unveiled that $26 billion had passed through the Binance accounts that cannot be adequately identified in 2023.
What Investors and Analysts are saying
Ayasi Emmanuel, a cryptocurrency investor, trader and influencer said to premium time that P2P trade is like a demand and supply trade. He said the merchants buying or selling works like a Bureau De Change (BDC) and transactions are being done with the rate of the parallel market.
Another analyst and investor - Adebayo Juwon, Co-founder of Finna Protocol, disputed the CBN's claim about the $26 billion that passed through Binance Platform in 2023, questioning how the apex bank accounted for the transactions. He said, "how was it calculated? Is it outflow or inflow? 90% of P2P trade is two Nigerians trading between themselves."
However, come to think of it. Binance is one of the cryptocurrency platforms that prioritize strick Know-Your-Customer (KYC) protocols. Before you could use Binance, you're required to reveals your national means of identification. So, why would CBN say $26 billion passed through unrecognized Binance Accounts?
In essence, these investors and analysts are saying that Binance P2P is not responsible for the Naira free fall. Juwon cited that despite the Nigeria's crypto investors and traders surpasses South Africa and Seychelles, each of the countries still boasts more trading volume than Nigeria's entire crypto space.
How P2P was introduced in Nigeria
Do you know that CBN created the P2P trade in Nigeria? Let me explain further to you. When CBN banned crypto in 2021, using of bank ATM card to purchase Bitcoin and other cryptocurrencies stopped and traders and investors have to seek for alternatives.
So, peer-to-peer (P2P) trades were introduced; whereby people needed to buy crypto from other people. This method wasn't secure enough and that's why crypto platforms like Binance created P2P Marketplace that brought buyers and sellers together.
Binance however, serves as middleman (escrow service) between both parties to ensure secure transactions so that no one get scammed.
Will Ban on Crypto Exchanges stop P2P Trade?
No, "the ban on crypto exchanges like Binance will not stop P2P trading," Juwon said. He unveiled that a large volume of P2P trading and transactions take place on WhatsApp. Many crypto merchants have already confirmed this information to be true to Techpoint.
These merchants have confirmed that they trade a minimum of $1 million per day on WhatsApp. In some cases, they trade over $5 million P2P transactions per day on WhatsApp.
Besides that, we have also seen some reputable crypto platforms like Patricia, Kucoin, ByBit and Juwon crypto platform - Finna Protocol offering P2P trading on popular social messaging platforms like WhatsApp and Telegram.
Although, WhatsApp crypto P2P offering is good as it won't end P2P trading, however, it will open many Nigerians to crypto frauds and scams. Unlike reputable crypto exchange like Binance that offers a secure interface for buyers and sellers to transact.
WhatsApp is just a messaging app, it doesn't have a unique features for escrow services and payment gateway. Hence, Juwon said, "while FG means well, they should make Binance a friend and not an enemy" to get the information they needed.
However, the consequences of the crypto ban imposed by the CBN will not only result in more crypto scams. Juwom also believes it will also negatively impact foreign investment. Major exchanges and platforms in the country have stopped the sale of USDT and USDC which could affect their user base and bottom line.