Nigeria, Africa’s crypto kingpin, is locked in a tense duel with Binance, the world’s heavyweight crypto exchange. This sagacious, real-life financial thriller is replete with damning accusations, arrests, a rather daring escape, and a high-stakes battle over digital currency.
The country’s booming crypto market, driven by a weakening local currency and soaring inflation, has made it a magnet for major players in the crypto sphere. However, the government remains sceptical. Authorities accuse the American firm of facilitating money laundering and even financing terrorism—claims that the platform vehemently denies.
Central Bank governor, Olayemi Cardoso, linked the loss of valuable tax revenues totalling $26 billion through the exchange. Forthwith the country’s federal government opened a new battlefront with crypto platforms.
The situation took a dramatic turn in March 2024, when Binance execs Tigran Gambaryan and Nadeem Anjarwalla arrived in the country for regulatory talks. Instead of a smooth negotiation, they were arrested.
Allegations and drama collide
Gambaryan, an American citizen, now faces charges of tax evasion and money laundering. His health has deteriorated under harsh detention conditions, drawing the attention and intervention of the U.S. government, which is urging for his release.
Anjarwalla, a British-Kenyan national, managed a dramatic escape from custody, becoming a fugitive on Interpol’s radar. His eventual capture seems inevitable. In retaliation for the treatment of its executives, Binance cut ties with Nigeria, halting trading with the Naira and effectively crippling their operations in the country.
“The arrest was careless, unprofessional. Other countries handle more complex cases with better professionalism. The reasons cited, such as money moving out of the country, inflation, economic disruption, and money laundering, are untrue. This situation highlights the government’s lack of understanding and unwillingness to learn about cryptocurrency,” says Daniel, a full-time crypto trader, whose full name is withheld for privacy reasons.
“Detaining executives who were lured into the country and demanding a $150 million bail is absurd. This uncalled-for action will scare away potential crypto businesses, especially since regulatory practices are unclear. Crypto was approved recently, yet now we’re arresting top executives,” he adds.
A coin-shaped monkey
Nigeria is Africa’s largest crypto economy by trade volume, but it is mired by a paradox. On one hand, its citizens increasingly turn to cryptocurrency to hedge against economic instability. On the other, the government’s aggressive crackdown on crypto trading platforms, exemplified by its actions against Binance, creates a hostile environment for the industry.
The cessation of trading with the naira marked an escalation of what started in 2017, when the CBN asked banks to refrain from facilitating related transactions, a move that was reiterated in 2021 with an official ban on processing crypto-related payments.
Despite the ban, cryptocurrency usage continued to grow, driven by high remittance costs and currency devaluation. After updating guidelines in December last year with a semi-positive draw, in May 2024, the CBN’s stance shifted with the de-listing of the naira from peer-to-peer cryptocurrency exchanges.
The accusations of money laundering and terrorism financing, though unsubstantiated publicly, and the tax agency’s four-count charge of tax evasion, complicate things further. The tax agency claims the platform facilitated tax evasion by its users.
De-listing the Naira from the Binance platform has affected the local crypto market. Many Nigerians engage in crypto trading, but government regulations and banking restrictions hinder their activities. Concerns about livelihoods have prompted traders to seek alternative platforms, leading to a shift in the market landscape, says Seyi Awojulugbe, Senior Analyst at SBM Intelligence, tells Bendada.com.
Despite initial panic, traders have adapted, with some exploring social messaging apps for trading. However, smaller traders exiting the market and limited government support hinder the growth of Nigeria’s crypto industry.
“The government’s stance on crypto trading has stifled the growth of Nigeria’s crypto industry. Potential investors are deterred by the risk of government intervention, limiting the industry’s development. Efforts to promote alternatives like the e-Naira have not been successful, highlighting the industry’s challenges,” Awojulugbe explains.
“Regulatory clarity and government support could unlock the industry’s potential, fostering economic growth and innovation. However, concerns about terrorism financing and tax evasion remain valid, underscoring the need for balanced regulation,” she adds.
Gambaryan’s plight has drawn international attention, particularly from U.S. politicians. A former IRS agent and Binance’s head of financial crime compliance, he has been detained since February. Reports of him collapsing in court and contracting malaria in the notorious Kuje Prison have intensified the call for his release. Despite a court order for his hospital transfer, he remains incarcerated under dire conditions.
U.S. politicians have labelled the charges against Gambaryan as baseless, viewing them as a coercion tactic to extort Binance. Their urgent appeals to President Biden and other officials stress the gravity of his situation, fearing for his life and demanding swift action.
Noah Perlman, Binance’s Chief Compliance Officer, has newly expressed a grim outlook on resolving the situation quickly. In interviews, he emphasised the company’s efforts to negotiate Gambaryan’s release but noted that the U.S. government holds the key to significant progress. Perlman reiterated Binance’s willingness to cooperate with Nigerian authorities, stressing that detaining Gambaryan is unnecessary for resolving regulatory issues.
A broader conflict
The conflict between Binance and Nigeria epitomises the struggle between governments and cryptocurrency platforms. As cryptocurrencies gain global traction, governments grapple with effective regulation of this burgeoning industry. Nigeria’s harsh approach, involving detentions and accusations, reflects its fear of financial instability and illicit activities facilitated by crypto.
For Binance, Nigeria’s actions present significant operational challenges. The company must navigate a landscape where regulatory compliance is critical yet fraught with political and legal uncertainties. The situations involving Anjarwalla and Gambaryan underscore the risks of operating in regions with stringent regulatory environments.
The spectacle is illustrative of the clash between traditional regulatory frameworks and the disruptive nature of cryptocurrencies. As the situation unfolds, it serves as a critical case study for other countries and crypto platforms navigating the complexities of regulation, compliance, and innovation.
“The uncertainty surrounding government actions and Binance’s case may deter potential investors and companies from fully committing to the crypto market in Nigeria and Africa,” Daniel opines.
Despite the availability of alternative platforms and the resilience of peer-to-peer networks, the removal of Binance, a major player, from the market has affected crypto trading. While the peer-to-peer market continues to function, the absence of a prominent platform like Binance raises concerns among new entrants and crypto companies about regulatory uncertainties.
