Binance, the largest cryptocurrency exchange platform in the world has temporarily suspended deposits in Nigerian naira — the country’s local fiat currency – in response to letter from Nigeria’s central bank (CBN) on Friday, instructing local banks to identify and close all accounts tied to cryptocurrency platforms or operations.
The CBN letter told local banking institutions that dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges is prohibited under a 2017 circular stating bitcoin (BTC) and other cryptocurrencies are not legal tender in the country.
While the move might impact fiat on- and off-ramps, most of the nation’s crypto trading occurs on peer-to-peer platforms and remains unaffected, according to sources in Nigeria.
In a statement, Binance announced its Nigerian naira payment partners suspended deposit services until further notice, starting from 7 p.m. local time (GMT+1) as of Friday, adding that it is monitoring the situation closely.
“Withdrawal services remain normal and will continue to be processed but might take slightly longer time than usual,” the statement said.
Central bank ban.
The CBN directive comes just months after protesters in Nigeria used bitcoin to raise funds after authorities reportedly shuttered bank accounts associated with the movement.
Since the letter started making rounds on the internet, Nigerian crypto users tweeted the hashtag #WeWantOurCryptoBack over 26,000 times, according to data obtained from SproutSocial.
But professionals in the crypto space do not believe the panic will last, or it will have any impact on crypto adoption.
Possible Reason for the Ban
Nigeria-based software and blockchain engineer Tosin Olugbenga told CoinDesk the CBN may have issued the directive because of the bitcoin price run of 2020 and growing interest in cryptocurrencies worldwide is causing Nigerians to convert their earnings to crypto.
“They’re moving money from naira to crypto. That is what the CBN sees and has taken issue with. It is not banning crypto trading. It’s just telling financial institutions not to allow their platforms to be used to buy or sell crypto on exchanges like binance,” Olugbenga said.
Olugbenga added that most crypto transactions in Nigeria happen on peer-to-peer exchanges, so once the panic dies down trading will continue as usual.
“The news has caused a panic in the crypto space, especially for new crypto investors, but the true essence of crypto is decentralization. [The] majority of crypto trades that occur in Nigeria are peer-to-peer,” Aronu Ugochukwu, chief executive officer of DeFi platform Xend Finance, told CoinDesk via an email.
So far, the CBN has not provided an official reason for the sudden order that is sending panic through social media.
Nigeria is the latest government to take an interest in regulating the space: India is once again considering a ban on private cryptocurrencies.
Meanwhile, the president of the European Central Bank, Christine Lagarde, said bitcoin facilitates questionable transactions and should be regulated on a global scale.
Changpeng Zhao, the founder of the largest cryptocurrency exchange platform in the world, Binance, has provided options on how Nigerians can safeguard their money following a ban on cryptocurrency transactions by the Central Bank of Nigeria (CBN).
Ripples Nigeria had reported that the CBN in a statement, prohibited the use of bitcoin and other cryptocurrencies in Nigeria, directing banks and other financial institutions to identify and shutdown accounts used to trade cryptocurrency.
Alternative ways of Investing
In the midst of the confusion which gripped many Nigerians, Zhao reacted to the CBN ban on Twitter, advising Nigerians to take the withdraw option, by pulling out their naira from Binance as early as possible to avoid system issues.
He, however, stated that Nigerians willing to continue investing in cryptocurrency can take the convert option, which enables them convert their naira on Binance to crypto without leaving the platform, “Crypto is not affected. Also looking at other P2P fiat options.”
While making the suggestions, Zhao said he “Received notice from our channel partners that NGN (naira) deposits and withdrawals will be affected. Still confirming details on when/how. Please withdraw your NGN (naira) as early as possible to avoid potential channel issues. Will share more details as they become available.”
Zhao also disclosed that the Binance platform will no longer receive naira deposit as the cryptocurrency platform has disabled deposit feature, “To err on the safe side, we have also disabled deposits to prevent more NGN (naira) coming in.”
While addressing a Nigerian user, Zhao said, “Don’t deposit NGN (naira) anymore. We don’t want any of our user funds to be stuck somewhere. Just to be safe.”
Ripples Nigeria understands that cryptocurrency users can store or deposit cash on cryptocurrency exchange like Binance, Buycoin, Bundle Africa, Quidax, and Paxful, and later convert to Bitcoin, Dogecoin, Ethereum, Litecoin and other cryptocurrencies when users want.
Meanwhile, Zhao warned that the CBN ban ordering banks to stop working with cryptocurrency exchange will not prevent peer-to-peer transactions, leading to a boom in the P2P segment, “It is likely that the Nigeria banks will stop working with exchanges. P2P trading will likely flourish as a result.”
Nigeria is the second largest market for cryptocurrency in the world, and P2P is the most used medium of transactions on the crypto exchange platforms.
P2P means direct transactions between two individuals without the involvement of the exchange itself.
