In a dramatic turn of events, Binance, the world’s largest cryptocurrency exchange, has announced the cessation of its naira-based operations in Nigeria. This move comes amidst heightened regulatory scrutiny by Nigerian authorities, aiming to stabilize the rapidly depreciating local currency, the naira.

The Central Bank of Nigeria’s governor, Olayemi Cardoso, has expressed concerns over the role of cryptocurrency exchanges in money laundering activities, specifically naming Binance for allowing $26 billion to flow through its Nigerian operations from unidentifiable sources. This accusation comes on the heels of Changpeng Zhao, Binance’s CEO, pleading guilty to anti-money laundering law violations in the United States.

Nigeria’s economy has been under strain, with the naira’s value plummeting against the dollar. From an exchange rate of approximately 410 naira to the dollar in May, it has fallen to around 1,600 naira on the official market and even hit 1,900 naira on the black market. Crypto exchanges, once seen as a haven for Nigerians to safeguard their assets, are now under fire for allegedly distorting foreign exchange rates and exacerbating the naira’s decline.

In response to the government’s actions, Binance informed its Nigerian users that all services involving the naira would be discontinued from March 8. However, the exchange reassured that other cryptocurrency services remain accessible. Reports have emerged of two Binance officials being detained upon their arrival in Nigeria to discuss these regulatory issues, with their passports confiscated. While the Nigerian government has not confirmed these detentions, there is talk of issuing arrest warrants for Binance’s top executives for failing to respond to official summons.

The situation has sparked concerns about Nigeria’s international reputation, with analysts like Seyi Awojulugbe from SBM Intelligence suggesting that such actions could have negative repercussions. Binance, for its part, has denied any misconduct in a statement last month.

Bayo Onanuga, a media adviser to the Nigerian president, has accused Binance of “economic sabotage” by influencing exchange rates, thus prompting the government’s crackdown. This stance contrasts with President Bola Tinubu’s pre-election promise of fostering a regulatory environment conducive to the healthy adoption of digital assets, including cryptocurrencies.

Despite a previous Central Bank of Nigeria directive that barred banks from facilitating crypto transactions and led to the closure of accounts linked to cryptocurrency exchanges in 2021, the Nigerian populace’s interest in cryptocurrencies has only intensified. The country has witnessed a surge in peer-to-peer crypto transactions, propelling Nigeria to the second spot on Chainalysis’s global crypto adoption index in just one year.

After President Tinubu took office, the Central Bank reversed its anti-crypto stance, only for a more severe crackdown on crypto exchanges to follow shortly after. This ongoing tug-of-war between regulation and innovation encapsulates the complex dynamics at play in Nigeria’s digital economy. As the country navigates these turbulent waters, the world watches to see how this pivotal African economy will balance the promise of cryptocurrency with the imperative of financial stability.