The Nigerian government has ordered cryptocurrency exchange Binance to pay some $10 billion in compensation over allegations it manipulated foreign exchange rates, causing the official currency, the naira, to lose almost 70% of its value.

Two Binance executives were arrested in Nigeria last week in relation to claims the company used speculation and rate fixing to manipulate exchange rates, leading to the naira’s collapse, which has exacerbated the cost of living crisis resulting in national protests.

Nigeria is the biggest economy on the African continent and has a large cryptocurrency market. The Govenor of Nigeria’s Central Bank recently said Binance Nigeria had moved some $26 billion of untraceable funds through the country.

These transactions, equivalent to around 12% of the country’s entire GDP, took place in the first six months of 2023, according to Reuters.

Companies must register to operate a cryptocurrency firm in Nigeria, but according to BBC, Binance failed to do this. A subsequent decision by the new President Bola Tinubu to scrap the pegging of the naira to the US dollar, meant traders could trade at rates determined on the market.

But the collapse of the naira was not expected with special advisor to the president, Bayo Onanuga telling BBC that suddenly, “the exchange rate went through the roof” adding it was “caused by people on the Binance platform”.

Binance, one of the most popular crypto exchanges in the country, has now been suspended, along with Coinbase, Kraken, FXTM, and Forextime, among others. The government took steps to try to halt the freefall of the naira.

The government has also claimed that crypto is being used to fund terror and launder money.

The “anonymity and privacy inherent in the cryptocurrency system are what draw individuals, particularly those with illicit intentions, towards its use,” said a recent report by the Nigerian Financial Intelligence Unit.

Governor of the country’s Central Bank, Olayemi Cardoso, said that “illicit funds” had been spotted on platforms in Nigeria but did not name any specific companies.

The naira is currently exchanging at around 1,595 to $1, compared to 460 a year ago.

The cost of living and high inflation, particularly for food and commodities such as fuel and transport, have led to big protests in the country in recent weeks.

Binance was based in Malta for 18 months between 2018 and 2019, availing itself of a “transitory” grace period during which the government attracted crypto companies to the ‘Blockchain Island’ before introducing anti-money laundering, consumer protection, and anti-market manipulation legislation.

During its time in Malta, Binance never paid a cent in taxes despite processing billions, and it upped and left as soon as the tougher regulations came into force.

In November 2023, CEO and founder of Binance ‘CZ’ Zhao pled guilty to money laundering offences, resigned from his position and agreed to pay more than $4.3 billion to settle a case with the US Department of Justice.