Economic analysts and cryptocurrency enthusiasts have expressed concern after Nigeria banned end-to-end transactions involving its currency, the naira, a payment processing platform, on Binance, the world’s largest cryptocurrency trading platform.
Binance shut down all naira services on Friday after Nigerian authorities accused the company of exploitation, naira devaluation and money laundering.
As of Monday, Binance exchange’s restrictions on naira services remained in effect. But critics say the measure could increase youth unemployment in a country already struggling with inflation.
The latest measures taken by authorities follow recent steps to try to save Nigeria’s currency from collapse and address economic problems.
Authorities said Binance manipulated the currency through speculation and fixing the exchange rate, causing the naira to depreciate.
The government has also accused the company of terrorism financing and money laundering, saying $26 billion worth of transactions on the platform were untraceable.
Binance denied any wrongdoing in a statement posted on its website last month.
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Public finance expert Isaac Botti says trading on Binance is not the root of Nigeria’s economic problems.
“This is due to our reckless demand and use of hard currency in Nigeria,” Botti said. “The main challenge is not the amount of virtual assets or dollars that people hold in their cryptocurrency accounts. It is the actual amount of dollars that the Central Bank of Nigeria actually holds. Amount of dollars released.”
Nigeria has 13 million cryptocurrency holders, more than any other African country. Kenya follows with 4.4 million.
Binance said in a statement last week that remaining naira on the platform will be automatically converted into Tether, a cryptocurrency stablecoin pegged to the U.S. dollar.
Last year, Nigeria imposed currency controls and ended gasoline subsidies in an effort to revive the economy.
But then the naira plummeted to a record low. Analysts say the government’s ban on Binance could lead to job losses.
Blockchain expert Jahdiel Chidi agreed, but said Nigerians will turn to new cryptocurrency exchanges to fill the void created by Binance’s exit.
“That means people are going to other exchanges,” Chidi said. “I mean, there are other options and platforms where you can do the same thing as on Binance.”
In February, Nigerian authorities cracked down on local currency exchange operators and revoked more than 4,000 licenses after the exchange rate fell to 1,900 naira to the dollar.
Chidi said the Nigerian government must find better measures to address the country’s current foreign exchange challenges.
“I think this was a hasty decision without a rigorous investigation into the allegations that Binance was involved in certain Naira-to-Dollar exchange rates,” Chidi said. “I think the main issue they should be focusing on is the import tariffs. This is what’s causing the Naira dollar One of the factors driving the depreciation. Binance happens to be a victim of the government’s wrong decisions.”
Last year, the central bank changed its stance on cryptocurrency companies, allowing them to operate — a move that was seen at the time as a positive gesture toward digital currency assets.
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