Author: Daniel Kuhn, CoinDesk; Compiler: Deng Tong, Golden Finance
At the end of February, The Nigerian government Publicly stated that it believes that $26 billion was illegally transferred abroad through Binance in 2023. This estimate was made by the country’s central bank governor, who stated that the country is losing tax revenue from unregistered crypto activities.
A few days later, the country’s authorities invited two Binance executives — Tigran Gambayan, who was in charge of the exchange’s financial crime compliance Tigran Gambaryan and the company's Africa regional manager Nadeem Anjarwalla - traveled to the country to discuss the issue. Theauthorities reportedly asked them to publish the names of Nigerians who transacted on their platform.
On February 26, Gambaryan and Anjarwalla were detained but not charged with any crime. The court granted the Nigeria Economic and Financial Crimes Commission's request to detain the two executives for 14 days, and although they were scheduled to appear in court on April 4, the BBC reported that the continued detention of Gambaryan and Anjarwalla was "unlawful."
According to reports, the two were intercepted by national security officials after arriving in the country on the grounds that Binance was illegal in Nigeria. operations. The move comes a week after the country moved to block access to multiple cryptocurrency platforms to tighten foreign exchange and capital controls on its collapsing local currency, the naira.
Nigeria is facing a dollar shortage, with the naira having fallen about 70% against the dollar since last year. Nigeria’s central bank governor, Olayemi Cardoso, directly named Binance at a press conference in late February, when he announced a record rate increase to stem the collapse of the naira.
Whether Binance has contributed to Nigeria’s deteriorating economic situation is undoubtedly debatable, however Judging from the extent of the detention of mid-level managers by the country’s authorities, Nigeria appears to be seeking to get tough on exchanges and find scapegoats for its financial woes.
At this moment, Binance is something of an international pariah. The world’s largest exchange recently agreed to pay a record $4.3 billion fine to the U.S. Department of Justice for “horrible” crimes it committed, including facilitating terrorist financing and the worst things you can do online.
The exchange has been kicked out of countless countries around the world, and its founding CEO Changpeng Zhao, the face of Binance for many years, was ordered to step down and may face federal prison time. In other words, it’s unlikely that many international courts or, better yet, business bodies will care about the survival of exchanges (which would be made worse by exchanges refusing to establish their headquarters in any particular country).
It is conceivable that Nigeria views Binance as a target for blackmail, this is something that no embassy would defend, and many are inclined to believe that it may have facilitated the illegal transfer of funds or tax evasion in the country. Notably, although the Nigerian government took action to block access to other cryptocurrency platforms, only Binance appears to have been attacked.
In early March, Nigeria’s presidential adviser Bayo Onanuga suggested that the country could fine Binance $10 billion, although he later said He was misquoted and nothing was "finalized" yet. On Monday, the country finally moved to accuse Binance of tax evasion.
The Nigerian Federal Revenue Service announced on Monday that Binance faces four charges, including alleged failure to pay value-added tax (VAT) or sales tax) and corporate income taxes, failure to file tax returns, and conspiring to help clients evade taxes through its platform.
The tax agency said Gambaryan and Anjarwalla - who had reportedly escaped from jail - were identified as defendants in the case filed at the Federal High Court in Abuja, the country's capital. In initial conversations, Nigerian authorities reportedly expressed two main concerns about Binance: It cannot trace flows through the exchange of funds, and the exchange puts pressure on the naira by facilitating trading on its peer-to-peer market.
Binance stopped all support for its Nigerian P2P market in early March due to pressure from the Nigerian government. The service has apparently become increasingly popular in 2021 after former President Muhammadu Buharithe banned many cryptocurrency activities in the country. In July 2023, the Nigeria Securities and Exchange Commission issued a warning to Binance, stating that "any investing member of the public dealing with this entity" faced a "high risk" of losing their funds by doing so.
However, it is not just Binance that the country is cracking down on. Bloomberg reports that “anti-corruption” officials have been arresting street currency traders and other allegedly unlicensed foreign exchange operators. This certainly provides the backdrop for Nigeria’s request for Binance to provide information on the country’s top 100 users, as well as information on the exchange’s trading history over the past six months.
Binance said it had previously worked with Nigerian agencies around the time of Gambaryan and Anjarwalla’s arrests, responding to 626 requests for information from law enforcement over the past four years. Late last year, one team even attended a training session with the anti-corruption agency.
Cryptocurrency will definitely exacerbate the economic situation in Nigeria. In countries facing inflation and economic instability, Bitcoin and stablecoins have seen above-average levels of adoption and usage, and here’s why: Cryptocurrencies are a way out of a bad situation. This may be why the Central Bank of Nigeria lifted the ban on banks dealing with cryptocurrencies in December 2023 and issued regulatory guidelines for virtual asset service providers. This will give authorities greater control and insight into cryptocurrency usage.
However, many economists believe that a combination of factors is weighing on the naira. President Bola Tinubu has eased the country's foreign exchange policy and cut the naira's peg in a bid to attract foreign investment and diversify the oil-reliant country's economy, adding to an already weak economy. Unfortunately, investment is slow (in fact, many foreign companies are leaving the country) and the naira has been falling for several months.
This is a tragic story. President Tinubu took office in May 2023, vowing to support local businesses, invest in infrastructure and address the intrusion of jihadist terrorists into Nigeria's shipping. Cryptocurrencies are also a national priority, which is an interesting sign for the entire cryptocurrency industry, legal or not.
Of course, Nigeria may welcome the crypto industry to the country, which would help boost the financial services industry and contribute to the national coffers. Notably, following the arrests of Gambaryan and Anjarwalla, a Binance spokesperson said that Nigeria is “not yet” one of its largest markets, although the country, with a population of over 200 million, has “extraordinary potential and we hope to continue investing there” .
There is also nothing inherently wrong with going after a company that fails to pay taxes or operates outside the sight of financial regulators. But Nigeria should be targeting companies, not middle managers and executives with families. Otherwise, the world may wish for more political prisoners to escape from prison rather than cheer for legitimate investigations.
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