Binance’s operations negatively impacted Nigeria’s financial system – SEC director

A Director at the Security and Exchange Commission (SEC), Abdulkadir Abbas, has stated that the operations of Binance negatively impacted Nigeria’s financial system. 

Appearing before a Federal High Court in Abuja heard on Friday, May 17, Abbas who is the Director of Registration, Exchanges and Market Infrastructure Department at SEC disclosed that not only did Binance operate in Nigeria illegally, its mode of operation circumvented the normal currency trading route put in place by regulators.

Recounting how Binance and its officials were invited by the NSA to a meeting to discuss its operations and the impact on the Nigerian economy, the SEC director said; 

“At the meeting, it was clearly observed that the first defendant’s (Binance’s) mode of operation is against the provision of the Investment and Securities Act 2007

“Apart from not being registered in Nigeria and making public solicitation without authorisation, the first defendant operates a naira peer-to-peer (P2P) in exchange for crypto assets.

“The naira P2P being deployed in the transaction circumvents the normal trading route. This is because the Central Bank of Nigeria (CBN) has banned banks from providing certain settlement platforms for crypto exchange.

“As a result of the naira P2P deployed by Binance, and coupled with the large number of Nigerian users, who were leveraging on that model, it adversely affected the official exchange rate.

“As a matter of fact, the Binance platform became a reference point for determining the exchange rate. The naira P2P model created uncertainty and a high level of volatility in the exchange rate as Nigerian users’ trade arbitrarily on the platform, thereby impacting negatively financial system stability.

“The naira P2P rate quoted on Binance’s platform is not referencing any official rate and its continuous operation affects the value of our naira. This was one of the serious concerns raised at the meeting we had at the office of the NSA.”

Abbas also said the rate at which naira was being sold on Binance’s platform had no relationship with the official exchange rate. According to him, the rate on Binance’s platform was not driven by any fundamentals, and it got to a stage where the value of the naira was determined based on the rate quoted on Binance’s platform.

He said the rate had no correlation or relationship with the official rate. Abbas also said that by operating its platform, which is not registered or regulated by the SEC in Nigeria, Binance was in breach of the extant provisions of the Investment and Securities Act 2007. 

The SEC Director said; 

“In addition, by making public solicitation to Nigerians without due authorization by the SEC, the first defendant violated the Investment and Security Act.”