Binance is the biggest crypto exchange in the world. Its US arm, Binance.US, is in trouble with the Securities and Exchange Commission (SEC). But the bulk of its operations are outside of the USA. Now the next largest crypto trading market outside of the US, Nigeria, has declared that Binance operations are illegal in their country. If Binance troubles outside of the US spread it will multiply its troubles with the SEC and cause serious damage to the company.
Nigeria SEC and Illegality of Binance
According to Bloomberg, the Nigerian Securities and Exchange Commission declared illegal all Binance Holdings Ltd. operations in the country shortly after the announcement of US SEC lawsuits against the US arm of the company. Binance Nigeria Limited is the Nigerian branch of Binance. The SEC there says that the company is not registered with or regulated by their commission making all of its operations in the country illegal. They advise the public that doing business with or investing in Binance Nigeria Limited should be done so at the customer’s own risk.
How Serious Are the Nigeria SEC Actions for Binance?
First of all, outside of the USA, the most peer-to-peer trading outside of the US occurs in Nigeria. The Nigerian SEC has stated that they will consider allowing digital currency offerings and trading in cases where the specific digital currencies are backed one to one by assets such as property, equity, or debt but not by other crypto assets. As an enforcement action the commission ordered Binance Nigeria to stop immediately their solicitation of investments from Nigerians. The commission says it is contemplating action against other exchanges operating in the country as well as regulatory actions against Binance Nigeria.
Will Actions Against Binance Spread Elsewhere?
The three biggest economies in Africa are Nigeria, South Africa, and Egypt. South Africa allows crypto but considers it a financial product and subject to the usual financial regulations. Now Nigeria is following suit. Egypt banned crypto for years but now allows it. It is highly likely that other nations will follow the example of Nigeria and seek to regulate Binance and other exchanges. The issue with Binance in Nigeria, and the USA, is not crypto trading. The issue is risk to customers and investors in an investment niche that has grown rapidly and without regulatory supervision.
Fallout from Crypto Winter and the FTX Mess
What regulators are looking at are not the losses investors and traders suffered during crypto winter and may still suffer today as they fail to accurately time the market. Rather it is the fact that investors in this niche have been led astray by hype from celebrities, lies about solvency by FTX heroes who misused customer assets and committed fraud in trying to keep failing companies afloat. It does not help Binance that its founder and chief openly says that he is not under any rules of US (or other) regulatory bodies. It does not help when the SEC uncovers evidence that Binance has transferred client assets to a trading firm separate from the governance of Binance. This is too reminiscent of FTX moving assets to its Alameda trading branch and pretending that it was not simply an intra-company loan. Binance with no home office and a boss whose whereabouts are always clouded in secrecy now becomes suspect as regulators race to shield customer assets. Banking partners of Binance in the US no longer do business with them and Binance does not do trades in US dollars. It would appear that the Binance empire is going to shrink as this goes forward. It could get to the point of an old fashioned run on the bank of the sort that brought FTX down. Such are the troubles of Binance in and outside of the USA.
Binance Troubles Outside of the USA – SlideShare Version