It’s no longer news that the Nigerian Naira has had a difficult start to 2024. Between January and February, the local currency hit its lowest point (in history) against the United States dollar.
The Federal Government of Nigeria, through the Central Bank of Nigeria (CBN), blamed the free fall on USD/Tether (USDT) trading practices on major cryptocurrency exchanges.
This phenomenon has stirred up regulatory concerns, leading to a drastic response from Nigerian authorities, particularly targeting the operations of major crypto platforms like Binance and others like Kucoin and Bybit. The world’s biggest exchange, Binance took a direct hit following the public expression by CBN Governor, Yemi Cardoso.
In a bold move, in February, the Nigerian authorities detained two Binance executives: Tigran Gambaryan, a U.S. citizen and Binance’s head of financial crime compliance was detained alongside Nadeem Anjarwalla, a British Kenyan.
Gambaryan appeared in court in Abuja on Friday but did not take a plea. Anjarwalla fled the country last month. But Binance has not been charged. A federal high court sitting in Abuja, last Friday adjourned the tax evasion trial to May 17.
The charges include non-payment of value-added tax (VAT), company income tax, failure to file tax returns, and helping customers evade taxes through the Binance platform. The Federal Government also accused Binance of failure to register with FIRS for tax purposes and contravening existing tax regulations within the country.
Related post: Detained executive: CEO says Binance is working with Nigerian government to resolve issues
Consequently, Binance banned Naira trading on its platform. Last week, CEO, Richard Teng said that the company is working closely with the Nigerian authorities “to try to resolve the matter” while speaking at the Token2049 crypto conference in Dubai.
Although there is no clear proof of this, it is believed in some quarters that the. clampdown on Binance has contributed to the relative stability of the Naira and its impressive recovery of the currency against the US dollar in the last four weeks.
However, there have been concerns that the Nigerian authorities would eventually go after other crypto exchanges facilitating p2p transactions like Bybit and KuCoin. Early this week, the CBN debunked a fake circular that had suggested the possibility.
Is Bybit toeing the Binance path?
Last week, a faceless association, which collectively styled itself as, the Nigerian Crypto Traders Association, released a statement to notable crypto exchange, Bybit.
Recall that after the clampdown on Binance p2p marketplace, Bybit, Kucoin and a few other exchanges became options for Nigerian crypto traders to continue their business.
According to the statement, the ‘association’ requested Bybit to instil price controls on the USDT/NGN trading pair to align more closely with the Central Bank of Nigeria’s official rates. The Association warns Bybit of potential repercussions, similar to those faced by Binance, should they fail to comply.
Although Bybit hasn’t issued any response, this writer can confirm that Bybit p2p is not in any way encouraging ‘price manipulation’ on its platform. Also, the crypto company isn’t allowing merchants to create ads above what is obtainable in parallel markets.
A glance at the Bybit p2p market shows that the quoted price of USDT isn’t higher than the USD market value against the naira in the black market, at press time.
Also, the NGN/USDT trading pair, which many analysts have cited as a catalyst for naira devaluation (due to how traders speculate and trade the USD/Naira movement), is unavailable on the Bybit crypto exchange.
The calls from this association could easily be received as inconsequential. However, it showcases the need for these platforms to navigate compliance with governmental regulations while maintaining operational integrity and user trust.
What players/stakeholders must do
Going forward, platforms like Bybit should consider establishing more transparent communication channels with regulatory bodies. Implementing recommended price control mechanisms will help avert potential legal actions and foster a cooperative relationship with the government.
On the other hand, the government should consider a balanced approach towards regulation which could be more beneficial. Instead of outright bans, working alongside exchanges to ensure compliance with financial guidelines might prevent market disruptions and support technological innovation.
On technological adaptations, crypto exchanges like Bybit could implement advanced analytical tools to monitor and control speculative trading. This will help in adhering to regulatory demands without fully stifling market freedom.
The Nigerian regulators, on their part, could employ technology to track and understand crypto transactions. This will lead to more informed decisions rather than reactionary measures.
Similarly, Bybit could deploy software to prevent merchants from creating Ads with prices above USDT market value. For example, in February when some Binance p2p users complained that they couldn’t place Ads at the height of the naira free fall.
This sort of mechanism could be deployed at Bybit, albeit in a way that promotes market liberty and at the same time checks out market manipulation.
What is next?
Simply put, the burgeoning crypto industry is in a state of upheaval with the authorities.
Read also: “Crackdown on Binance is right but the approach is wrong”- A chat with Oladotun Akangbe of Flincap
For exchanges, the challenge lies in balancing profitable operations with regulatory compliance. For the government, the task is to harness the benefits of digital currency innovations while protecting the integrity of the national currency.
This is why all stakeholders must engage in constructive conversations to achieve a harmonious balance. Whether it is adjusting to new regulations, enhancing platform features, or fostering a better understanding of crypto operations, the path forward should ideally be navigated with cooperation and a clear vision toward sustainable growth in the sector.
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