Binance imposes USDT/NGN trading restrictions amid deepening Naira decline

Binance, recognized as the world’s largest cryptocurrency exchange, has imposed restrictions on peer-to-peer transactions concerning the USDT/NGN pair, as the naira slumped to unprecedented lows on Tuesday. The exchange executes the role of holding currencies in trust, enabling Nigerians to exchange the naira for USDT, a stablecoin that matches the US dollar.

Binance clarifies that this intervention seeks to safeguard users against fraudulent activities and manipulation. The company has taken measures to deactivate the ‘sell’ function for its Nigerian clientele, subsequently inhibiting them from selling USDT via its platform. Concurrently, Binance has capped the purchasing ability of Nigerian users at a rate of ₦1802.

Remarkably, this is the second instance within a six-month timeframe where Binance has prescribed USDT/NGN prices, following an earlier move in December precipitating an increase of ₦300 against the dollar during a single day of trading. However, this progress proved to be temporary.

Binance, the world’s top cryptocurrency exchange, has avowed its commitment to compliance, stating in a blog post, “As industry leaders, we are working hand in hand with local authorities, lawmakers, and regulators to ensure we act on non-compliance.”

In recent times, Nigerians have favored Binance for purchasing cryptocurrency as a safeguard against inflation and currency depreciation. Binance plays a significant role in establishing prices in Nigeria, which operates with both “official” and “parallel” market rates. There is speculation that price pegging on Binance may be related to the belief that price manipulation could be occurring on the exchange.

One crypto trader commented on Binance to TechCabal, noting, “The only problem with [Binance] is the ability of users to quote rates very high above the market rate.”

Following the restrictions imposed on Binance, traders are exploring alternate avenues. As reported by some traders to TechCabal, they are shifting to other peer-to-peer platforms to trade stablecoins. On Tuesday, the naira was traded for as low as ₦2000 to 1 USDT on Kucoin, a competing platform to Binance.

Two crypto traders speaking to TechCabal claimed that the volume of USDT transactions is not substantial enough to influence prices. Amidst these developments, one person expressed optimism, stating “We believe that if proper steps are put in place, we will worry less about crypto being the issue but focus on other relevant sectors that will increase our USD inflows.”

Since June 2023, the CBN has eased currency controls and introduced a number of new policies aimed at curbing speculation and assisting efficient price discovery. However, the bank’s efforts have been hindered by ongoing liquidity problems and arguably inefficient communication. This has broadly resulted in a lack of confidence in the apex bank, which is struggling for stability solutions. This week, the Debt Management Office boosted the yield for Nigerian bonds by up to 3% in the past month to absorb excess Naira liquidity and attract foreign investors.