Key Points:

• The Commission further cautioned that Binance Nigeria is neither registered nor regulated by the Commission, and its operations in Nigeria are, therefore, illegal.
• The opaque nature of the details of the ownership of Binance Nigeria has left members of the public disillusioned.
•  Cryptocurrencies tend to be used in Nigeria to help resolve problems associated with limited access to formal banking structures.

The Nigerian Securities and Exchange Commission has moved against Binance Nigeria Limited. Still, global crypto trading platform Binance denies any connection with it.

“The attention of the Securities and Exchange Commission has been drawn to the website operated by Binance Nigeria Limited, soliciting the Nigerian public to trade crypto assets on its various web and mobile-enabled platforms,” Nigeria’s SEC announced at the start of June.

The Commission further cautioned that Binance Nigeria is neither registered nor regulated by the Commission, and its operations in Nigeria are, therefore, illegal. Any member of the investing public dealing with the entity is doing so at their own risk.

The Nigerian SEC’s move against Binance, the world’s largest cryptocurrency trading platform, followed similar actions from its counterpart organisation in the United States. Just a few days before its announcement, the US SEC filed 13 charges against Binance entities, accusing the company and their founder Changpeng Zhao “with a variety of securities law violations”.

The chair of the American regulator, Gary Gensler, said, “through thirteen charges, we allege that Zhao and Binance engaged in an extensive web of deception, conflicts of interest, lack of disclosure, and calculated evasion of the law.” While Binance and Zhao have denied all the charges, it came as little surprise to most observers when the Nigerian SEC followed suit.

Binance Limited owner Zhao distanced himself from Nigeria’s Binance.

There was, however, a twist when Zhao denied that Binance Nigeria was anything to do with him or his company. Nine days after the Nigerian’s SEC charge, Zhao tweeted: “Binance has issued cease & desist notice to the scammer entity’ Binance Nigeria Limited.’ Don’t believe everything you read in the news.”

This development has raised eyebrows in some quarters. Documents on Nigeria’s Corporate Affairs Commission, the country’s company registry, show that Binance Nigeria was registered as early as December 2019. While the company is marked as “dormant”, some are sceptical that the global Binance entity remained unaware of the Nigerian company for almost four years.

It reported that the company registry records of Binance Nigeria Limited does not show ownership by Binance. The opaque nature of the details of the ownership of Binance Nigeria has left members of the public disillusioned. However, it has been suggested that the company was registered by a Nigerian lawyer, Ahassan Ifzal Mughal, who hoped to profit from selling the incorporated name to U.S Binance.

Mughal told reporters that “we are willing to hand over full control of Binance Nigeria Limited to Binance.com should they choose to legally enter into the Nigerian market and are further available to provide our legal services to them in obtaining legal regulatory compliance in Nigeria.”

A Binance spokesperson told blockchain news website Mariblock: “We are aware of the circular. However, the entity mentioned in the circular [Binance Nigeria Limited] is not affiliated with us. We are therefore seeking clarity from the Nigerian SEC and remain committed to collaborating with them cooperatively on the next steps.”

The contradictions underlying the Security Exchange Commission’s move.

This confusion related to Binance’s activities in Nigeria comes at a time when authorities in the country are beginning to consider the potential of cryptocurrencies in a more favourable light. While regulators in the West African country have at times appeared unconvinced about crypto, recent moves from the SEC have suggested that Nigeria may be prepared to start liberalising its approach to digital assets. In April, the SEC announced that it would offer digital exchanges the opportunity to apply for licences on a trial basis.

Nigerian blockchain and cryptocurrency experts strongly believe that the new government led by Bola Ahmed Tinubu has made positive noises about the technology – and that the SEC’s charge against Binance, therefore, came as an unwanted surprise.

Perhaps even more concerning for pro-crypto figures in Nigeria is the fact that global headwinds are pointing towards more stringent regulation for crypto exchanges. After the collapse of the Terra stablecoin in May 2022 and the spectacular disintegration of the FTX exchange in November, which came about because of a liquidity crisis amid the alleged misuse of client funds, regulators worldwide have moved to crack down on alleged wrongdoing.

Binance is one of many to have been charged by regulators in the US and elsewhere. The US SEC has also charged global exchange Coinbase with selling unregistered securities. It has been embroiled in a long-running legal saga with blockchain payment network Ripple for similar reasons. While Nigeria has the independence to regulate the cryptocurrency industry as it sees fit, this global context could make it more difficult for advocates to argue successfully for more liberal rules.

Positive future for crypto trading in Nigeria.

Data shows that Nigeria is the second biggest market for crypto in Africa, after South Africa, with Nigerians being some of the most pro-crypto consumers anywhere in the world. Cryptocurrencies tend to be used in Nigeria to help resolve problems associated with limited access to formal banking structures and poor financial inclusion. Digital assets have proved to be particularly valuable for conducting cross-border remittances, a process which is often costly and time-consuming with traditional fiat currencies.

There is no evidence that these attitudes have shifted in light of the regulatory issues Binance and other global exchanges have confronted. But how this controversy affects the attitudes of Nigerian regulators if at all, remains to be seen.