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Binance's Head of Financial Crime Compliance, Tigran Gambaryan, flew to the Nigerian capital to address an issue: the country's government accuses the world's largest cryptocurrency exchange of causing its currency collapse.
The American, a former special agent of the US Internal Revenue Service, left his wife and children at their home in Georgia in late February, with just a small suitcase, preparing for what he thought would be a brief business trip. But he has not returned yet.
According to Gambaryan's family, Nigerian authorities detained Gambaryan and his colleague, Nadeem Anjarwalla, a British and Kenyan citizen who is also Binance's regional manager for Africa. Binance employees are being held in guarded accommodations and have not been charged with any crimes. The local government, which invited them to Nigeria for a meeting, has not publicly discussed the detention.
Nigeria, Africa's largest economy with a population of over 220 million, has faced currency crises multiple times before. However, this marks the first time cryptocurrency has played a major role.
In recent years, Nigerians have flocked to cryptocurrency to protect their savings from skyrocketing inflation rates (reaching nearly 30% in January) and currency depreciation. Two-thirds of the local population live in poverty.
According to an index compiled by Chainalysis, Nigeria ranks second globally in cryptocurrency adoption, only behind India. Chainalysis claims that Nigerians received approximately $60 billion worth of cryptocurrency transactions in the 12 months ending June 2023.
Due to strict controls by local authorities on foreign exchange, many residents seek refuge in USD-pegged digital currencies (stablecoins).
Stablecoin transactions have essentially become a black market, with market exchange rates between the local currency, the Naira, and the US dollar far below official rates. According to currency traders, Binance is the most popular exchange and the preferred destination for checking black market exchange rates.
Bayo Onanuga, special advisor to the Nigerian president, accuses Binance of interfering with Nigeria's exchange rate formulation and replacing the role of the central bank.
He wrote in a post on X: "Our country should ban cryptocurrencies, otherwise our currency loss will continue to increase."
The new government that came to power last year attempted to simplify the complex exchange rate system consisting of multiple official rates and give market forces greater influence over the value of the currency.
However, the persistent gap between the value of the currency perceived by the government and the exchange rates on the Binance website has proven intolerable for the government.
Onanuga told The Wall Street Journal that Binance is cooperating with authorities to discuss compensation for Nigeria.
Last week, after the detention incident occurred, Binance announced it would halt any services involving the Naira, dealing a blow to its efforts to rebuild business in the rapidly growing emerging market.
Restrictions on cryptocurrency websites
The Nigerian Communications Commission ordered telecommunications companies to restrict residents' access to Binance and other cryptocurrency platforms.
Olayemi Cardoso, Governor of the Central Bank of Nigeria, stated that cryptocurrency platforms are being used to manipulate the market.
He said, regarding Binance, that $26 billion flowed through Binance's Nigerian platform last year, and the central bank could not fully identify the sources and users of these funds. Cardoso did not disclose the source of this figure.
A Binance spokesperson stated that the company requires all users to undergo strict identity verification. While he did not comment on the $26 billion figure, he said that not all transactions are related to the Naira since users can exchange one cryptocurrency for another. He added that the total trading volume should not be mistaken for the actual funds passing through the exchange.
"We are cooperating with Nigerian authorities to safely bring Nadeem and Tigran back home to reunite with their families," he said. "We believe this matter will be resolved swiftly."
The company stated in a blog post that Binance allows buyers and sellers to trade with each other, so it does not set prices. When the Naira experiences extreme fluctuations, the system automatically suspends transactions to prevent manipulation. The company added that businesses attempting to manipulate the market will be kicked out.
Binance was founded in China in 2017 and has repeatedly incurred the displeasure of the government. The company has long operated without a headquarters and under the scrutiny of regulatory agencies, offering unauthorized transactions through its global website.
In November, Binance founder Changpeng Zhao stepped down as CEO and admitted to violating US anti-money laundering requirements. The company agreed to pay a $4.3 billion fine, the largest fine ever levied against a cryptocurrency company. Zhao is currently awaiting trial in the United States.
Last year, the Nigerian Securities and Exchange Commission stated that a local Binance entity was operating illegally and was ordered to cease operations. However, users continue to access the global website Binance.com. |
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Post time 25-3-2024 08:16:29
