Key Insights:
- Binance has introduced a cap on the USDT selling price in Nigeria to adhere to local forex regulations, setting the limit at 1,802 naira per USDT.
- Nigerian traders seek alternative exchanges as Binance blocks accounts selling USDT above the set price cap, affecting P2P market dynamics.
- Despite regulatory challenges, Nigeria remains the largest P2P crypto market after the 2021 ban on bank-facilitated crypto transactions was lifted.
Binance recently took a significant step in Nigeria by setting a selling price cap for Tether (USDT) tokens on its peer-to-peer (P2P) platform. This move aims to ensure compliance with the regulations set forth by Nigerian authorities. Traders using the Binance platform can now not sell USDT for more than 1,802 naira per token. This decision reflects Binance’s commitment to cooperating with local regulators, lawmakers, and enforcement bodies to address any instances of noncompliance among its users.
We are dedicated to providing a market-driven platform for users, as well as working hand in hand with local authorities and regulators.
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— Binance Africa (@BinanceAfrica) February 20, 2024
However, this price cap has led to unintended consequences for the crypto exchange. Several traders facing restrictions on selling USDT at higher rates have moved their trading activities to alternative exchanges. These platforms do not impose such limits, allowing for free trading. Binance explained the price cap as the result of an “automatic system pause,” which kicks in during periods of significant currency fluctuation. The exchange assured that this measure is temporary and that adjustments have been made to allow trading to resume as usual.
The backdrop of this development involves the Nigerian government’s efforts to combat forex speculation through the Office of the National Security Adviser and the Central Bank of Nigeria (CBN). Such activities have been a driving factor behind the depreciation of the naira, leading to inflation and economic instability. The government’s decision to unify forex windows in mid-2023 resulted in the naira’s value halving against the dollar, showcasing the volatility and challenges within Nigeria’s forex market.
Moreover, the Nigerian Securities and Exchange Commission (SEC) warned in June 2023 against using Binance, stating that the platform operates without a license in the country. This further complicates the landscape for Binance, which is navigating regulatory challenges while striving to maintain its position in Nigeria’s bustling P2P market. The recent lifting of the crypto ban by the Central Bank of Nigeria, allowing banks to facilitate cryptocurrency transactions, presents a new chapter for the crypto industry in the country.
Nigeria has emerged as the world’s largest P2P cryptocurrency market following the CBN’s 2021 prohibition on financial institutions engaging in crypto transactions. This ban led many Nigerians to turn to P2P platforms for their foreign exchange needs, driven by lower fees compared to traditional banking and Bureau de Change channels.
In December 2023, authorities issued a directive to financial institutions across Nigeria, effectively reversing the prohibition on cryptocurrency dealings. This development enabled banks within the country to engage once again in digital currency transactions.
Binance’s introduction of a USDT price cap in Nigeria represents a strategic adjustment to comply with local regulatory demands. While this move has prompted some traders to seek alternatives, it also reflects the ongoing negotiation between crypto platforms and regulatory bodies in markets where digital currencies are gaining traction.
