“Binance Nigeria Limited is hereby directed to immediately stop soliciting Nigerian investors in any form whatsoever,” stated the Securities and Exchange Commission (SEC) on Friday. The statement added that the company was not registered or regulated, rendering its operations in the country, illegal.
Nigeria’s markets regulator has ordered the world’s largest cryptocurrency exchange Binance to halt its operations in the country, saying a local unit that courted Nigerian investors through a website was illegal.
Last year, Nigeria’s SEC published a set of regulations for digital assets, signaling Africa’s greatest demographic power was trying to find a middle ground between an outright ban on crypto assets and their unregulated use.
That was after Nigeria’s central bank in 2021 banned banks and financial institutions from dealing in or facilitating transactions in digital currencies.
Last week, the United States’ Securities and Exchange Commission sued Binance and Coinbase for allegedly breaching its rule, detailing a list of 13 charges against Binance, as well as its US subsidiary and its CEO, Changpeng Zhao.
This comes after US federal authorities had expressed in February their will to bring order to the cryptocurrency market, following the momentous bankruptcy of FTX, a platform that had long fallen through the regulatory cracks.
Africa: fastest growing crypto market?
According to the crypto exchange platform Coinbase, roughly 50% of African citizens don’t have banking access, making Bitcoin an attractive alternative.
To fill the banking gap, cellular companies have built a patchwork system around mobile wallets and payments tied to phone numbers — but most of these systems aren’t interoperable, and sending or receiving money from abroad often means high fees or running into government currency controls.
These points are some of the reasons why Sub-Saharan Africa is among the fastest growing crypto markets on earth, according to Coinbase, “with 6% of all transactions being peer-to-peer, more than double the share of the next closest region.”
Another big reason: inflation. Many countries, including Nigeria, Ghana, Sudan, and Ethiopia struggle with high currency inflation, making crypto a viable alternative.
In Zimbabwe, cryptocurrency is flourishing to battle currency volatility and inflation. Despite the IMF’s warning, the reserve Bank of Zimbabwe has sold 14 billion Zimbabwean dollars’ worth of gold backed digital tokens, worth around 39 million dollars.
The gold backed crypto tokens introduced in April are sold at a minimum price of $10 for individuals and $5,000 for corporations and other entities.
According to Coinbase, Africa has emerged as an epicenter for crypto adoption as entrepreneurs in Ghana, Nigeria and South Africa are leading the charge.
A need for better regulations?
According to Chainalysis, Africa is one of the fastest-growing crypto markets in the world, but remains the smallest, with crypto transactions peaking at a mere $20 billion per month in mid-2021.
Anglophone Africa has the highest number of users in the region, as many people use crypto assets for commercial payments, but their volatility makes them unsuitable as a store of value.
“Policymakers are worried that cryptocurrencies can be used to transfer funds illegally out of the region and to circumvent local rules to prevent capital outflows,” denotes the IMF article.
Indeed, about 20% of sub-Saharan African countries have banned crypto assets.
It also denotes that widespread use of crypto could also undermine the effectiveness of monetary policy, creating risks for financial and macroeconomic stability.
The Central African Republic is the first country in Africa and the second in the world after El Salvador to designate Bitcoin as a legal tender. This measure has put the country at odds with the Bank of Central African States (BEAC) and violates the Economic and Monetary Community of Central Africa (CEMAC) Treaty, which it is a member of. Central Africa’s Banking Commission has banned the use of crypto for financial transactions in the CEMAC region, according to the October 2022 Regional Economic Outlook.