In a surprising move, Nigerian authorities have initiated a block on access to major cryptocurrency exchanges, including Binance, Coinbase, and Kraken. The decision, orchestrated by the Nigerian Communications Commission (NCC), aims to combat currency speculation amid a significant decline in the value of the naira.
Telecoms Ordered to Restrict Access
Late on Wednesday, the NCC issued directives to telecom companies, instructing them to limit consumer access to specified cryptocurrency exchange websites. This directive had immediate consequences, with consumers experiencing intermittent access to the affected sites as of Thursday.
This move signals a notable shift in Nigeria‘s approach to cryptocurrencies. Previously, President Bola Tinubu’s government had embraced digital assets as part of broader market-friendly reforms to attract foreign investment. These reforms included efforts to regulate digital assets, overturning a prior ban on crypto transactions aimed at enhancing anti-money laundering and terrorism financing measures.
Efforts to Stabilize Currency
While embracing cryptocurrency, the government is also attempting to address its complex multiple exchange rate system and end a long-standing currency peg. The naira has faced two devaluations in eight months, hitting a record low of 1,600 to the dollar on Wednesday. Cryptocurrency exchanges, particularly Binance, have played a crucial role in establishing unofficial market prices for the naira.
Bayo Onanuga, a special adviser to President Tinubu, took to social media to accuse Binance of influencing the exchange rate for Nigeria, alleging a blatant hijacking of the Central Bank of Nigeria’s role. The spokesperson for Binance responded, acknowledging issues faced by some Nigerian users but reassuring the security of users’ funds.
Cryptocurrency’s Popularity and Skepticism
Nigeria ranked second globally, after India, in the proportion of private wealth stored in cryptocurrency last year. Despite this, analysts suggest that interest in digital assets is primarily concentrated among younger investors. Digital assets, especially stablecoins like tether, have gained traction as a perceived alternative to the volatile naira.
Nigeria has a history of unconventional measures to protect its currency. In 2021, the price-setting website AbokiFX was shut down, and in 2015, trees in the capital Abuja were cut down to hinder parallel market traders. Last year, the Nigeria Securities and Exchange Commission declared a local Binance entity illegal, though consumers could still access the international Binance.com site.
International Repercussions and Regulatory Scrutiny
Binance, a key player in the cryptocurrency market, faced legal consequences in November, paying a $4.3 billion penalty and witnessing its founder, Changpeng Zhao, stepping down as CEO after pleading guilty to U.S. criminal charges related to money laundering and sanctions violations.
As Nigeria grapples with economic challenges and attempts to stabilize its currency, the unexpected crackdown on cryptocurrency exchanges has raised concerns and added a layer of uncertainty to the nation’s evolving relationship with digital assets.
