Central Bank of Nigeria Accuses Binance of Running Shadow Bank

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As a researcher with a background in finance and experience following the Nigerian financial sector, I find the developments surrounding Binance’s operations within Nigeria concerning. The accusations leveled against Binance by Dr. Olubukola Akinwunmi of the Central Bank of Nigeria (CBN) and the Economic and Financial Crimes Commission (EFCC) highlight potential regulatory violations that could jeopardize financial stability and integrity.

The Central Bank of Nigeria (CBN) has reprimanded Binance, the internationally renowned cryptocurrency exchange, for providing banking services without obtaining necessary approvals. This censure, delivered by Dr. Olubukola Akinwunmi, the CBN’s Head of Payment Policy and Regulation, during a hearing at the Federal High Court in Abuja, signifies an intensified examination of cryptocurrency activities by the Nigerian authorities.

Dr. Olubukola Akinwunmi stated that Binance was providing deposit and withdrawal services directly to customers, bypassing the required authorization from banks and financial institutions.

As a crypto investor, I’ve come across information where Binance’s platform was accused of deceiving Nigerian users into believing they could conduct naira transactions through a cash link. The Economic and Financial Crimes Commission (EFCC) testified to this, adding that Binance promoted fee-free deposits and flat-fee withdrawals for such transactions. However, it is essential to note that these services are actually regulated by the Central Bank of Nigeria (CBN), and using them without following the proper regulatory channels could result in unintended consequences.

Allegations On Binance

As an analyst, I’ve come across allegations made by the Nigerian government towards Binance and two of its executives, Tigran Gambaryan and Nadeem Anjarwalla. These accusations revolve around concealing the origin of $35.4 million believed to be derived from illicit activities. The testimony revealed that Binance facilitated the transfer of illicit naira funds into dollars – a service requiring approval from the Central Bank of Nigeria (CBN).

Additionally, it came to light that numerous Binance traders use false names instead of revealing their true identities while conducting financial transactions, which goes against the regulations requiring identity disclosure.

Dr. Akinwunmi explained how Binance’s peer-to-peer (P2P) system enables Nigerian users to exchange naira directly with one another on the platform. However, this is a regulated activity that Binance doesn’t have authorization for in Nigeria. This allegation adds complexity to Binance’s business dealings in the country and highlights the Nigerian government’s firm position against unauthorized financial transactions.

What’s Next?

After Dr. Akinwunmi’s testimony was presented in court, it was decided to pause the proceedings until July 16 for the defense’s opportunity to question him. The recent enforcement action against Binance is consistent with the National Security Adviser’s designation of cryptocurrency trading as a matter of national security concern.

In the past, Binance temporarily suspended the use of its Peer-to-Peer (P2P) trading function for Nigerian customers due to regulatory scrutiny from the government. The ongoing legal dispute underscores Nigeria’s rigorous regulatory approach towards cryptocurrency transactions and its commitment to preserving financial security and soundness.

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2024-07-06 20:20