Binance, the world’s largest cryptocurrency exchange, placed limits on peer-to-peer transactions trading the USDT/NGN pair as the naira fell to record lows on Tuesday afternoon. The exchange, which acts as an escrow and allows Nigerians to trade the naira for USDT, a stablecoin pegged against the US dollar, claims the move protects users from fraud and manipulation.

For its Nigerian users, the cryptocurrency exchange disabled the ‘sell’ feature, preventing them from selling USDT on its platform. Binance also limited Nigerian users’ buy option to a price of ₦1802.

It is the second time in six months that the exchange is pegging USDT/NGN prices, following a similar move in December that saw the naira gain ₦300 against the dollar in one day of trading action. That momentum was short-lived.

“As industry leaders, we are working hand in hand with local authorities, lawmakers, and regulators to ensure we act on non-compliance,” the exchange said in a blog post.

In recent years, Nigerians have taken to Binance to buy cryptocurrency as a hedge against inflation and currency devaluation. Binance has also become crucial to price discovery in a country with “official” and “parallel” market rates. Pegging prices on Binance is linked to a belief that speculators on the exchange may be manipulating prices.

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

With the ban on Binance, traders are exploring other options. At least three crypto traders told TechCabal they are moving to other peer-to-peer platforms to trade stablecoins. On Tuesday, the naira traded for as low as ₦2000 to 1 USDT on Kucoin, a Binance competitor.

Two crypto traders who spoke to TechCabal said the volume of USDT transactions is not significant enough to affect prices.

“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,” one person said.

Since June 2023, the CBN has relaxed currency controls and released a raft of new policies intended to reduce speculation and aid efficient price discovery. However, a persistent liquidity problem and arguably poor communication continue to hamper the bank’s efforts.

It has translated broadly to a lack of confidence in the apex bank as it scrambles for solutions that can provide stability. This week, the Debt Management Office increased the yield for Nigerian bonds by as much as 3% in the past month to mop up excess Naira liquidity and attract foreign investors.

*This is a developing story