It was a routine Thursday for Pascal*. He’d planned to convert some Naira to USDT on his favourite exchange, Binance, a strategy he used to hedge against inflation and build a safety net. He soon found out that he wasn’t able to access the Binance website. Flustered and worried, he hobbled around for new alternatives to carry out his transactions. 

This sudden disruption wasn’t unique to Pascal. On Wednesday, February 22, news broke that Nigeria’s telecom regulator, the Nigerian Communications Commission (NCC), had restricted user access to the websites of Binance, Coinbase, and Kraken, accusing the companies of manipulating prices of the naira/dollar pair in unofficial markets.

These crypto exchange platforms became the go-to for direct crypto transactions—through their peer-to-peer trading feature—after Nigeria’s central bank abolished local financial institutions from enabling crypto transactions in 2021. The crypto exchanges have also played a significant role in determining unofficial exchange rates for the naira, with platforms like Binance often serving as benchmarks for local foreign exchange rates.

While the websites of Binance, Coinbase, and Kraken have been inaccessible in the country, crypto traders who spoke to TechCabal claim they now use alternatives like Bybit, Bitget, Kucoin, and Coincola and messaging platforms like Telegram, (which comes with an in-app wallet) to make transactions. However, Bybit has emerged as a favourite for these crypto traders who say the exchange’s low transaction fee—0.2%—is a reason for the choice. 

“Law enforcement in Nigeria notoriously follows a scapegoat approach,” claimed Caleb Nnamani, a technology reporter at Cardano-backed publication, Nodo. 

“If you’re going to do a thing, do it thoroughly,” Rume Ophi, a crypto analyst, told TechCabal, speaking on the spared exchanges. “It’s like robbing Peter to pay Paul.” 

As Nigerians turn to foreign alternatives to transact crypto, these traders have ignored local exchanges such as Zap, Furex, and Quidax. “Crypto-savvy Nigerians trust foreign exchanges because of their outsized liquidity,” Nnamani told TechCabal. “A hack to a global exchange behemoth comes with some assurances of payback.” According to him, Nigerian crypto traders don’t trust local exchanges to keep their funds safe in the event of a hack. 

“I think it comes down to popularity. We are more familiar with Binance, OKX, and the rest.” One crypto user said. “They have proven to be very good. I think that’s what is giving them the edge [over local platforms]”

A risky shortcut

Users’ options for crypto trade have not been limited to just alternative exchange platforms. Two Crypto traders who spoke to TechCabal said they have been trying out Telegram’s newly launched P2P trading platform as a workaround. Launched in September 2023, Telegram’s crypto wallet—a bot embedded within the messaging platform—allows users to trade cryptocurrencies directly with each other and even purchase crypto using their bank cards. While this method allows for the convenience of trading within Telegram, it is not a perfect fit for crypto traders. One crypto trader who spoke with TechCabal was sceptical about trading safely on the app. “It’s new and untested, and I’m unsure how they handle user complaints,” expressed the cautious trader.

These user’s fears are valid. Telegram offers a custodial wallet, which means it holds onto users’ access keys—critical for authorizing crypto transactions—which raises security concerns, as a third party holding the keys increases the risk of a leak if Telegram’s security is compromised.

A big concern with Telegram is its custodian wallet. Unlike other platforms, Telegram holds onto users’ private keys, which are essential for crypto transactions, meaning that in the event of a hack on Telegram, a user’s crypto could be stolen. 

Telegram did not respond to TechCabal’s request for comments.

Nnamani also expressed concerns about the limitations of trading on Telegram. “You’d prefer a fintech you can send, save, and probably do multiple money functions on,” he said. “Why would I p2p here then go and look for my other crypto needs elsewhere.”

Before the presence of crypto exchanges in Nigeria, crypto traders often clustered in messaging platforms like WhatsApp to source for crypto deals. Unlike regulated exchanges, trading on these messaging platforms lacks the security of escrow services offered by crypto exchanges, leaving users vulnerable to scams. However, the administrators of these groups often take the place of an escrow. Nigerians are fast returning to this mode of sourcing for deals since the closure of Binance. 

“I used to trade on a supposedly ‘trusted escrow’ group on WhatsApp,” shared a crypto trader who wished to remain anonymous. “Unfortunately, some members who didn’t use escrow got scammed.”

Binance, the embattled exchange

While crypto traders in the country continue to explore workarounds to trading since the ban of their darling exchange, Binance continues to slug it out with the Nigerian government. One of the company’s two executives, who flew into the country to resolve its blocked website, remains in detention, while the other, has reportedly absconded. As a result of the squabble, the exchange discontinued all naira services on its platform.

The Nigerian government has repeatedly suspected Binance of manipulation of forex prices on its platform. The suspicion was confirmed after the government analysed peer-to-peer trading transactions on the platform and found huge buy orders—as much as $1.9 million—for USDT by Nigerian retail traders who never followed through, raising suspicion about an attempt to manipulate prices for personal gain. The report also reviewed that artificial demand for USDT resulted in the naira’s quick drop from $1/₦1,500 to $1/₦1,950.

Before the restriction of its website, Binance placed limits on how much naira could be traded for the USDT, to help salvage the naira after the currency sank to new lows. The exchange also disabled selling USDT altogether and limited buying it to a fixed price of ₦1802. However, the recent report by the CBN claimed that more than 40% of the buy offers came from the same accounts. 

TechCabal reported earlier this week that the Nigerian government had filed tax evasion charges against the company,  and its detained executives, Nadeem Anjarwalla and Tigran Gambary. The government accused Binance of three tax offences: not registering with the tax collection agency, Federal Inland Revenue Service (FIRS), not paying value-added tax (VAT) and company tax, and not filing tax returns. 
Before the tax eversion charges, Binance had put out plans to patch up its relationship with the Nigerian government.

In a statement released on Thursday, March 14, Binance emphasized its commitment to compliance and collaboration with Nigerian authorities, claiming to have assisted Nigerian law enforcement with information needed to investigate financial crimes such as scams, fraud, and money laundering.