Prolonged face-off with Binance will scare investors and founders – Nigerian blockchain group

Temitope Akintade

An umbrella body of blockchain organizations in Nigeria, the Blockchain Industry Coordinating Committee of Nigeria (BICCoN), has reacted to the series of upheavals in the Nigerian blockchain industry. 

In a statement signed by Lucky Uwakwe Arisukwu, the chairman of the body on Tuesday, the inter-community working group expresses worry that the legal tussle with the global crypto exchange platform has gone on for too long and has the potential to cause damages to the nascent Nigerian blockchain industry.

In the statement made available to Technext, the group highlights ways the unresolved issues are making Nigerian startups lose credibility by missing out on global investors and partners. BICCoN which represents a unified voice for the Nigerian blockchain industry, is at the forefront of suggesting policy ideas to industry regulators.

Prolonged face-off with Binance will scare investors and founders - Nigerian blockchain group
Lucky Uwakwe, Chairman of BICCoN

These events have led to a chilling effect on investment, with a notable decline in foreign investments and collaborations with Nigerian web3 startups”, the group claimed.

Recall that the Nigerian authorities, in a bid to crack down on what it called ‘financial market manipulation and naira sabotage’, have been in a prolonged legal battle with the largest crypto exchange in the world, Binance which led to the detainment of two of the exchange’s executives.

In February, Nadeem Anjarwalla, a British Kenyan, a regional manager for Africa was detained alongside Tigran Gambaryan, a United States citizen and Binance’s head of financial crime compliance were charged to court by Nigeria’s tax agency, the Federal Inland Revenue Service (FIRS) on the charges of tax evasion.

The Nigerian authorities filed criminal charges against the two Binance executives, Tigran Gambaryan, before a Magistrate Court in Abuja. A few weeks later, 38-year-old Nadeem reportedly escaped from custody under bizarre circumstances.

Reports said there were efforts by the Nigerian authorities to repatriate Najeem to the country, in partnership with the Kenyan authorities. But, nothing significant has been heard about that.

Although Richard Teng, Binance CEO had earlier claimed he was working closely with the Nigerian government to resolve the situation, he later announced that the Nigerian authorities were demanding a hefty bribe from its detained executives to make the money laundering trial initiated against them go away.

Nigeria arraigns detained Binance executive for tax evasion, laundry of $35m
Tigran Gambaryan sits as he waits to face prosecution for tax evasion and money laundering at the federal high court in Abuja, Nigeria April 4, 2024. REUTERS/ Abraham Achirga

Last week, the detained Tigran Gambaryan petitioned an Abuja Federal High Court to order the Office of the National Security Adviser (NSA) of Nigerian and its anti-corruption agency, the Economic and Financial Crimes Commission (EFCC) to pay compensation costs for his prolonged detention in the country, claiming that the detention violated his rights and was used to pressure Binance, causing hardship to his family.

Also last week, two members of the United States Congress, Representative French Hill (Republican) and Representative Chrissy Houlahan (Democrat) visited him at the Kuje Detention facility and called for his release in a social media post.

Related post: US members of Congress visit detained Binance executive, Tigran Gambaryan in detention, call for release

Conflict with Binance scaring off Blockchain investors

According to BICCoN, the blockchain industry is inherently global. And, fostering strong relationships with international partners is vital for Nigeria to remain at the forefront of crypto innovation and economic development in Sub-Saharan Africa.

The body suggests that the protracted regulatory issues involving Binance and the detainment of the company’s employees have had detrimental effects.

“Startups that were once poised to attract significant funding now find themselves struggling to secure financial backing which is crucial for their growth and development.” – BICCoN stated.

The group noted that Nigerian law enforcement and regulatory bodies have benefited from partnerships with global blockchain companies like Elliptic and Chainalysis. Some of these companies have provided tools and support for forensic analysis and investigations as part of their contributions to combating cyber crimes.

Prolonged face-off with Binance will scare investors and founders - Nigerian blockchain group

Unfortunately, the detention of Binance executives and the tension it has generated has threatened Nigeria’s chances at consolidating those crucial collaborations,  BICCoN said.

“It is imperative to recognize that such actions could lead to a withdrawal of support from international partners, leaving local regulators, law enforcement, and private investigators without the necessary tools and expertise to effectively regulate the industry. This, in turn, could hinder the growth and development of the counter-terrorism efforts of the government and ultimately affect the broader economy.”

BICCoN fears that the imbroglio will not only affect foreign investors – domestic investors and entrepreneurs within Nigeria are also reeling from the impact. This is because investors typically seek assurances that their investments will be protected and always need to know that they are operating in a stable and supportive regulatory framework. 

This has adversely affected job creation and economic growth, as startups are a key driver of employment and technological advancement.”, it adds.

Ultimately, the perception of Nigeria as a hostile environment for blockchain business and innovation can have long-term negative effects. Chief among these is the potential to encourage blockchain investors in the space to seek other investment destinations that are more predictable and stable,  BICCoN says.

Recommendations from BICCoN

To address the lingering issue and foster a conducive environment for the blockchain industry in Nigeria, BICCoN provides some recommendations.

Read also: Almost 3 years later, Nigeria’s digital currency, eNaira struggles for adoption

First, it calls on the Nigerian authorities and regulatory agencies to engage in open and constructive dialogue with Binance and other relevant stakeholders in the cryptocurrency sector to address their concerns and work towards mutually beneficial solutions.

BICCoN suggests that such dialogue should focus on understanding the specific issues at hand, such as regulatory compliance, financial stability, and the impact on the national currency, while also considering the broader implications for the industry and the economy.

Prolonged face-off with Binance will scare investors and founders - Nigerian blockchain group
Some BICCoN group members…

Apart from emphasising the need for justice and due process (transparency, fairness and adherence to international best practices) in handling the Binance case, BICCoN recommends that the government actively seek collaboration with local and international blockchain communities.

The group also urged the government to take steps to reassure investors of its commitment to a fair and transparent regulatory environment which can include public statements, policy updates, and demonstrate a willingness to resolve disputes amicably.

Also, BICCoN called on the government to address the concerns around peer-to-peer (P2P) trading and its reported impact on naira fall. According to the umbrella body, “Conducting thorough investigations and providing transparent findings can help clarify the situation and build trust among stakeholders.”

Lastly, BICCoN calls on the Nigerian government to develop a clear and comprehensive regulatory framework that should guide compliance, taxation, and consumer protection, while promoting innovation and growth, for the crypto industry. 

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