The news that has shaken the crypto world has come from Nigeria in the last few weeks. The Nigerian government has entered into a public dispute with Binance, one of the largest cryptocurrency exchange platforms.

The government claims that Binance owes it $10 billion and that its practices have defrauded the citizens of Nigeria and allowed money laundering to happen. That's how the actions of Nigerian officials have been interpreted, at least, and some already claim that the government is backtracking on those comments.

What Happened?

Binance operated in Nigeria without the proper licenses; therefore, it didn't apply the relevant regulations and laws to prevent money laundering. In the process of their operations in Nigeria, about $26 billion in untraceable funds has left the country.

Nigeria is facing a foreign currency crisis and desperately needs funds to stop flowing outside its borders. That's one of the reasons that the government has reacted so harshly and came up with such a high figure for its penalty. However, there are already some disputes about what kind of fine the government can and plans to impose on Binance, if any.

What Are the Alleged Crimes?

Bayo Onanuga, a spokesperson for President Bola Tinubu, told the press that the exchange platform has set and charged its own exchange rate for the value of the Nigerian national currency, the Naira, and that it's not allowed to do so. In fact, only the national bank is permitted to set up a currency exchange rate.

"I said our government may impose heavy fines on Binance for what happened," Onanuga told the Gazette. "I never said Binance had been informed about the fines or that it would definitely be $10 billion. I only said the amount may be imposed, which is because nothing has been finalized yet."

Other Government Actions 

The government has detained two Binance officials who have been traveling to Nigeria, and their passports have been confiscated.

"It is not necessarily arrest per se," Zakari Mijinyawa, a spokesman for the National Security Adviser, said. "Meetings and discussions are ongoing. It's a national security issue, and an interagency process is ongoing."

The government of Nigeria is claiming that the actions performed by Binance have caused 70 percent of the downturn the national currency is experiencing. Some experts dispute this and claim that even though Binance acted irresponsibly, the financial issues the country is facing go deeper than that.

Binance Looking for New Markets 

Binance has been looking for new markets for years now. It has left its European headquarters because of the EU's complex regulations. Binance couldn't comply without losing some of its revenue or users, so it decided to move out.

Many claim that growing African and Middle Eastern markets are the next big thing for the world of Bitcoin trading. Binance's Nigerian operations are a part of that trend.

Was Binance Authorized to Operate in Nigeria?

This remains a difficult question to answer in legal terms. Nigeria didn't have clear regulations as to trading with crypto, so no laws were broken because there were no laws to break. That's one reason the BTC exchange platform has decided to move parts of its operation to Nigeria, and many others have done so as well.

When cryptos were first introduced, there were few regulations around them, as the concept was new and the government needed time to catch up with real-life applications. For some users and financial services, this is the case with new markets such as the one in Nigeria.

New Regulations

As a response to the events we mentioned, Nigeria's SEC is creating a set of new regulations that will govern the use and sale of cryptocurrencies in the country. Since February, Nigeria has blocked access to a few major BTC platforms. This includes the best Bitcoin exchanges, such as Binance, Kraken, and Coinbase.

"We are continuing to investigate these reports, but based on an initial investigation, it appears that Coinbase.com remains accessible from Nigeria," the spokesperson for Coinbase said in an email.

The report said the new SEC guidance would ensure "criminals are not registered as operators" in the capital market, although it's unclear how criminality would be assessed. The public has already scrutinized the guidance, with some measures being commonplace while others are considered too extreme.

What's in the Guidelines?

 The guidelines include standard anti-money laundering measures many other banks and financial institutions use and rules for battling financial terrorism.

"The SEC has also developed a new AML/CFT/CPF onboarding manual for licensing/registration, and ongoing screening of Digital and VASP Beneficial Owners to ensure that criminals are not registered as operators in the capital market," an SEC notice from March 4 reportedly said.

"The SEC is ready to interface with genuine VASPs based on these clear rules and regulations," and before final approvals, the SEC will consult on its proposed measures.

Banking Ban

This isn't the first time Nigeria and the cryptocurrency industry are at odds with each other. A few years ago, Nigeria also banned local banks from trading in crypto.

In February 2021, the Central Bank of Nigeria ordered banks to "identify persons and/or entities" who were conducting transactions in crypto or running BTC exchanges and "ensure that such accounts are closed immediately.".

The ban didn't work. The research done by Statista showed that as many as 32 percent of Nigerian citizens use some sort of cryptocurrency as a payment method. A new set of measures doesn't mention the ban, meaning that the government has given up on it.

Since Bitcoin has been widely used in the region, at this point, there's no point for the governments to try and stop or curtail it, only to regulate its use.

State of the Region

In neighboring African countries, cryptocurrencies have become something that wasn't initially planned—the citizens use them as a hedge against inflation. Since inflation has also increased in the West, some have claimed that it's possible to use crypto in the same way and prepare for further inflation changes.

Botswana has issued the same regulation as the ones seen in Nigeria, effectively banning banks from using Bitcoin. At the same time, the Bank of Mauritius is planning to launch a digital currency for the central bank. The project is supposed to be completed in cooperation with one commercial local bank. The currency will be called the Digital Rupee, and there are other small cryptos in the works that will probably be stablecoins and have niche uses.

Conclusion

Binance has been open in Nigeria for years, and the government has stopped its operations. That's because the government claims that Binance was engaged in illegal practices that have cost the country billions of dollars. They've also threatened to levy a heavy fine and arrested two of its officials.

Soon after, the government softened its stance and claimed that there was no set amount for the fine and that the officials weren't under arrest. Instead, it has come up with a more strict set of regulations that crypto establishments will have to follow from now on. This is the course other African governments have taken to respond to the financial struggles their currencies are experiencing.