The Central Bank of Nigeria (CBN) has intensified its scrutiny of cryptocurrency exchange Binance, accusing the platform of engaging in unlicensed financial activities. This development adds another layer of complexity to the relationship between cryptocurrencies and financial institutions within the Nigerian landscape.
Local media reports detail the testimony of Olubukola Akinwunmi, head of payment policy and regulation at the CBN, before the Federal High Court of Nigeria. Akinwunmi alleges that Binance facilitated deposit and withdrawal transactions in Nigerian naira (NGN) without proper licensing. The CBN contends that such activities are reserved for authorized banks and financial institutions within the country.
The Nigerian government’s case against Binance extends beyond unauthorized deposit and withdrawal services. They have accused Binance and its executives, Tigran Gambaryan and Nadeem Anjarwalla, of conspiracy related to financial crimes. Specifically, the accusation centers around the obfuscation of the source of $35.4 million allegedly linked to illegal activities within Nigeria.
During the court proceedings, Akinwunmi, under questioning by Ekele Iheanacho, counsel for the Economic and Financial Crimes Commission (EFCC), highlighted alleged misleading practices employed by Binance. He claimed that Binance’s platform attracted Nigerian users with the promise of fee-free naira deposits and flat-fee withdrawals. Akinwunmi argued that these activities are strictly regulated by the CBN and can only be undertaken by licensed financial institutions.
The accusations extend further, with Akinwunmi claiming that Binance facilitated currency conversion from NGN to USD. According to Nigerian regulations, currency conversion services require authorization from the CBN, either as a Bureau de Change or a licensed authorized dealer. Additionally, Akinwunmi pointed out that Binance facilitated these transactions without requiring proper user identification, potentially violating know-your-customer (KYC) regulations.
The focus of the CBN’s investigation also encompasses Binance’s peer-to-peer (P2P) transaction system. Akinwunmi detailed how the system operates, highlighting how buyers transfer NGN directly to sellers’ bank accounts. Once confirmed on the platform, the cryptocurrency or fiat currency is released. Akinwunmi asserts that such P2P transactions constitute a regulated activity requiring authorization, which Binance allegedly lacked.
Court Case Continues
Following Akinwunmi’s testimony, the court adjourned until July 16th to allow for cross-examination by the defense. The judge also issued a directive to the Nigerian Correctional Services demanding the production of medical reports for Tigran Gambaryan.
This legal action against Binance is part of a broader crackdown on cryptocurrency activity within Nigeria. The National Security Adviser recently classified crypto trading as a national security concern. Additionally, the CBN has instructed fintech startups like Opay, Moniepoint, Paga, and Palmpay to identify and report accounts engaging in cryptocurrency transactions.
In February 2024, Binance preemptively disabled its P2P feature for Nigerian users due to increasing government scrutiny. Furthermore, during a virtual meeting with the Blockchain Industry Coordinating Committee of Nigeria (BICC), the Securities and Exchange Commission (SEC) advocated for delisting the NGN currency from P2P platforms. This proposed measure aims to curb potential market manipulation and safeguard the integrity of Nigeria’s capital market.
