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The arrest marks an escalation in Africas largest economys new war on crypto.

In December, the central bank seemed ready to welcome crypto platforms into the financial system. It canceled a three-year order that barred banks from enabling crypto trades, laying the groundwork for a new license that companies started preparing to apply for. But Cardoso a former Citigroup banker appointed to the central bank in September has reverted to the view, held by his predecessor Godwin Emefiele, that crypto trading seriously undermines currency stability.

Nigeria faces soaring inflation at nearly 30% and a restive public bemoaning the rising cost of food and transportation. The central bank has pushed a flurry of tools targeting exchange rate and price stability in recent weeks. At the same time, government officials have put a lot of blame on companies like Binance, pointing to naira for USDT trades as encouraging undue demand for the dollar and undermining policymakers efforts.

Currency traders told us they were acting on Binances rates, one government official, who spoke on the condition of anonymity, told Semafor Africa. The official suggested that a move against Binance became necessary after the central banks attempt to close the gap between official and black market foreign exchange rates weakened after brief success.

Crypto transactions in Nigeria in the 12 months up to June 2023 were worth $57 billion, according to data firm Chainalysis. Beyond inflations role in making it an attractive hedge, Nigerians adopted crypto for personal and business-related cross-border transactions, users say.

This weeks regulatory offensive may cool those trends judging by crypto exchanges quick retreat, though intrepid users will find other means to keep trading crypto, like using virtual private network (VPN) apps to bypass blockades. Nigeria, which has experienced exits of multiple multinationals citing inflation and currency depreciation problems, could be giving foreign investors another reason to seek other markets.

We are not China or India, where the markets are so large that most global companies will suck up whatever misbehavior their government does and find a way to make a deal, said Cheta Nwanze, head of geopolitical analysis firm SBM Intelligence in Lagos. A crypto crackdown approach involving arrests is a lose lose situation for us, he said.

It would be more useful for Nigeria to address the factors weakening the currency rather than focus on symptoms, said John Ashbourne, an emerging markets economist at Fitch Solutions in London. The real cause of the depreciation is that more and more Nigerians are losing faith in the naira and prefer to keep their money in really any other currency, even a famously volatile crypto unit, Ashbourne told Semafor Africa.

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Arrest of Binance executives shakes up Nigerias crypto ecosystem, again - Semafor