Give Binance a chance

One of my favourite shows is Nigerian Idol for unveiling amazing talent as well as its mix of comedy and drama. This year’s edition prompted this post because of one of its sponsors, Binance, the cryptocurrency exchange, whose adverts seem to be playing every time I switch on the tv.

I’ve used Binance to trade cryptocurrency but that was in the old days before the CBN (seemingly) banned cryptocurrency transactions. To see Binance so front and center on Nigerian TV made me wonder what magic has been done to enable it to so boldly market its products to the Nigerian viewing public who were, about a year ago, told that ‘cryptocurrency is illegal’ by the CBN.

This post looks at who is behind Binance, what it actually does and answers the question ‘how to trade cryptocurrency in Nigeria’.

Binance – who, what, where, when?

Binance is the self proclaimed largest crypto currency exchange in the world. It was founded in July 2017 by Changpeng Zhao, a ‘Chinese-Canadian coder’ who had previously built high frequency trading systems for Wall street. In a short space of time not only has Binance become the largest crypto exchange globally but also the Binance coin, which can only be bought and sold on Binance, is one of the top 5 crypto currencies globally based on market cap. There is much more information out there if you want to dig. Doing your due diligence i.e. knowing who you do business with, particularly when investing, is essential. Another essential is making sure that you use operators that are regulated as this gives additional reassurance that you have some protection if anything goes wrong. In the not so ideal world of cryptocurrency, there are no regulated players

Regulation

Binance is not currently regulated but is a proponent of regulation which it believes will expedite the ‘mass adoption’ of cryptocurrency. Binance has had some regulatory run ins in China, the US and UK and with countries such as Nigeria and Kenya banning cryptocurrency, it has not been fully embraced by the establishment and regulatory structures as yet. As cryptocurrency evolves and regulators try to make sense of it and regulate it, this will add legitimacy and keep pushing the market to grow ever larger.

Should Binance’s current regulator-less state worry you? Yes and no, Yes because there are a handful of regulated crypto-exchanges globally which shows that it is possible to achieve formal regulatory recognition. No as these remain in the minority.

What does Binance do?

Binance is primarily a cryptocurrency exchange where you are able to buy and sell cryptocurrencies as well as carry out a number of other activities including:

Education: The Binance academy contains over 360 articles about cryptocurrency and blockchain technology

Research: Binance research offers ‘ institutional-grade analysis, in-depth insights, and unbiased information to all participants in the digital asset industry’. This includes general research on crypto markets and some individual coins. The last report I could see on the research site was dated January 2021 so it doesn’t appear to be regularly updated.   

Charity: I was mildly surprised, when I opened the Binance charity page, to be greeted with a picture of African schoolchildren posed with hands folded in prayer probably to the good people of Binance for saving them. Whilst i am peeved at the stereotypical portrayal, on a positive note the site states that the foundation has raised nearly $80m and impacted over 1.8m beneficiaries during its existence.

In addition to Education, Research and Charity there are a number of other services for institutional investors, those looking to create blockchain projects and also a token launch platform. For budding crypto investors, developers and founders, Binance has you covered and the market is developing deeper into other products including NFTs, Derivatives  including futures and options etc. 

How to use Binance in Nigeria

There is a decent amount of content on youtube that covers cryptocurrency trading and specifically how to use Binance in Nigeria. You can find succinct, explanatory videos such as this and the Binance blog has a post  which talks about how to go about trading bitcoin in Nigeria. The post is dated January 2022 and is not specific to Binance, its almost as if it is written by a third party and gives very high level information. Read on for a summary of what it covers:

How to buy crypto currency in Nigeria today

The process is similar to opening an account with a bank. The steps:

1. Download a crypto exchange app and wallet
2. Open an account wth the exchange – this may involve KYC
3. Fund your wallet. The article says that most exchanges will let you pay with you pay with a debit card or transfer directly to your account. (Of course we know better given the ban on cryptocurrency and following this approach may likely lead to the closure of your account).
4. Buy / Sell. At the click of a button you can buy and sell cryptocurrency:
   1. Buy. Using the funds in your wallet you can buy the equivalent value of cryptocurrency less a fee charged by the Exchange for processing
   2. Sell you can sell and cash out (again the crypto ban makes this theoretical) or you can sell an existing holding and purchase a different currency in a non-cash transaction.
5. Cashing out. The use cases for cashing out are limited in the normal course of business but again the article says that you can.
6. Transaction tracking. Tracing the status of your transactions is made easy on Binance as it supplies transaction IDs and explains how you can independently verify the existence of your transaction on the block chain.

It all appears straightforward but the inconvenient truth of the cryptocurrency ban in Nigeria remains a reality.

The crypto ban

The CBN circular dated 5^th February 2021 stated:

“ The Central Bank of Nigeria (CBN) has directed all banks to desist from transacting in and with entities dealing in cryptocurrency. The CBN also directed banks to close accounts of persons or entities involved in cryptocurrency transactions within their systems.”

This circular was followed by legal action taken by CBN against 4 fintech firms which appeared to reinforce the ban and the Central Bank’s power to impose it. Most banks have complied with closing down accounts for those exchanges, individuals and businesses that are actually or appear to be engaging in cryptocurrency trading and in turn these businesses are no longer offering direct buying and selling of cryptocurrencies through their accounts / systems.

Is trading cryptocurrency a crime?

The Street Lawyer has a take on this which I find makes sense. Their take is that there is no law in Nigeria, that they have found, authorising CBN or any other government agency to ban crypto currency trading in Nigeria. The circular that was issued does not carry the legal weight of legislation and so cannot be taken into effect.

This is further supported by a legal ruling made in August in the matter of CBN against one of the 4 fintech firms that it had previously banned. The judge ruled that the CBN could not rely on a circular to freeze the bank accounts of a company using its accounts to trade cryptocurrency because the circular is not the law.

Who wants to challenge the CBN by going ahead to use their accounts openly for cryptocurrency? Not me! There is, thankfully, an available avenue to trade cryptocurrencies in naira and if you are interested in doing so, read on:

How to actually trade cryptocurrency in Nigeria

Can you actually trade cryptocurrency on Binance in Nigeria using naira from a bank account without having it shut down?

The short answer is yes and the way to do it is by P2P or peer to peer trading.

Peer to peer trading – the workaround

Peer to peer trading has been described as being akin to a black market as it happens outside of a recognised exchange and relies on trust and an appetite for taking risk in order to make money. In its simplest form it works like this

In a nutshell you can buy and sell cryptocurrencies in Nigeria by using the platform to manage your cryptocurrency while you settle the payment outside of the platform. As it is for Binance is likely how is for the other exchanges, that allow Nigeria based users to sign up.

Thank you for listening and here’s to your financial health!