The world’s largest cryptocurrency exchange, Binance has implemented restrictions on peer-to-peer transactions involving the USDT/NGN pair as the naira experienced record lows on Tuesday.
The exchange, serving as an escrow for Nigerians trading naira for USDT (a stablecoin pegged against the US dollar), stated that this measure is aimed at protecting users from fraud and manipulation.
For Nigerian users, Binance has disabled the ‘sell’ feature, preventing the selling of USDT on its platform. Additionally, the exchange has limited the buy option for Nigerian users to a price of ₦1802. This move marks the second instance in six months where Binance has pegged USDT/NGN prices, following a similar action in December that saw the naira gaining ₦300 against the dollar in a single day of trading, albeit briefly.
Binance emphasized its commitment to collaborating with local authorities, lawmakers, and regulators to ensure compliance in a blog post, positioning itself as an industry leader.
In recent years, Nigerians have turned to Binance for purchasing cryptocurrency as a hedge against inflation and currency devaluation. The exchange has played a crucial role in price discovery in a nation with both “official” and “parallel” market rates. The decision to peg prices on Binance is influenced by concerns that speculators on the platform might be manipulating prices.
In response to the Binance restrictions, traders are exploring alternative options. Some have indicated a shift to other peer-to-peer platforms for trading stablecoins. On Tuesday, the naira traded for as low as ₦2000 to 1 USDT on Kucoin, a competitor to Binance.
Since June 2023, the Central Bank of Nigeria (CBN) has eased currency controls and introduced various policies to reduce speculation and enhance efficient price discovery. However, persistent liquidity challenges and, arguably, inadequate communication have hindered the effectiveness of the bank’s efforts. This has led to a lack of confidence in the CBN, prompting the Debt Management Office to increase the yield for Nigerian bonds by as much as 3% in the past month to address excess Naira liquidity and attract foreign investors.
