While the Central Bank lifted a directive restricting banks from “dealing in cryptocurrencies or facilitating payments for cryptocurrency exchanges” in December 2023, it began asking banks to block the accounts of p2p traders by May 2024. 

On August 23, 2024, a high court in Uyo, Nigeria, denied an application to unfreeze Patrick Okon’s Kuda bank account. The restrictions on his account were directly linked to crypto payments. In April, the Economic and Financial Crimes Commission (EFCC) asked a court to block over 1,000 bank accounts over crypto links. 

In March 2024, Nigeria’s financial regulators blocked prominent fintechs from onboarding new customers for five weeks as a currency crisis worsened. It moved against Binance on claims that the platform allowed for manipulation of the naira and detained two of the company’s executives. 

While the case against the detained Binance executive Tigran Gambaryan drags on, the CBN compelled fintechs to block any account believed to be trading crypto. The SEC, which issued last week’s crypto licences, also held several meetings in May suggesting that exchanges should block p2p transactions out of patriotism. 

These policy flip-flops make it likely that banks and fintechs will continue to distance themselves from crypto-related activities. 

“Crypto is still persona non grata. The CBN has not openly accepted it yet,” one bank executive who asked not to be named told TechCabal.

Banks are ignoring the provisional licences the Securities Exchange Commission  (SEC) issued to Quidax and Busha, said highly placed executives at prominent fintech startups.  

Omotimi Agama, the SEC’s director-general, insisted to TechCabal that “the CBN has lifted any ban.”

While Agama’s position is accurate, banks and financial institutions prefer to play it safe with the Central Bank, always choosing caution. 

“The devil is in the details,” a top executive at one of the fintechs told TechCabal.  “The [guideline] is confusing, and the processes are challenging.”

Chike Okonkwo, the founder of Gamic, a blockchain startup, that claims to have been speaking to the SEC since 2019, understands the banks’ position. 

“If that circular [greenlighting] the banking of crypto firms is binding, why can’t retail traders freely add crypto to the description of their banking transactions?”

Busha, one of the new licensees, is more optimistic and anticipates a better relationship between banks and crypto companies. 

“The issuance of the crypto licences is a critical step in maturing the industry. It means that users can engage with operators with increased confidence, which should generally deepen the market,” a spokesperson for Busha said. The company also claims that it is ready for whatever “tight but effective regulations” are deemed necessary by the CBN.

Until then, banks and fintechs will continue sitting on their hands in understandable fear of the CBN’s hammer. 

“Nigerian banking laws are not customer-friendly,” a highly placed fintech executive told TechCabal, adding that “Financial institutions [retain] the right to freeze any account they have reasonable suspicions about any infraction or illicit activity.”

Are crypto trades illegal? Two new licences and the CBN’s December 2023 directive say they’re not. However, one operations manager at a commercial bank states, ” We can only acknowledge the license after receiving instructions from the CBN, our regulator.”

“Approval is yet to be given to anyone,” SEC Director General Emomotimi Agama told TechCabal via text.

The move suggests a major policy turnaround from the SEC which has talked up banning P2P trading which Nigerian authorities blame for the volatility in the FX market. In May 2024, the SEC DG met with crypto industry players and reiterated the need for crypto exchanges to delist naira from P2P trading. 

In January 2024, TechCabal reported that at least two crypto exchanges—Quidax and Luno—were in talks with the SEC over a crypto licence after the Central Bank lifted a two-year ban on crypto-related banking transactions. Both companies declined to comment at the time. 

Since February 2024, crypto exchanges have faced increased scrutiny from Nigerian regulators. The government accused crypto traders of using P2P trading to manipulate the naira. Nigeria’s National Security Adviser (NSA) also classified crypto trading as a national security issue.

Binance, the world’s largest crypto exchange, has been at the center of a regulatory clampdown in Nigeria with the company facing money laundering challenges and one of its executives detained. Central Bank Governor Olayemi Cardoso claimed $26 billion in untraceable transactions were processed by Binance. 

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DAT was imposed on crypto exchanges such as Binance and Coinbase. The law also directed that crypto taxes be remitted within five working days, along with a tax return detailing deductions and other required information.

None of the local cryptocurrency exchange platforms had remitted the taxes to the Kenya Revenue Authority (KRA) before Wednesday’s ruling that declared the bill illegal, a crypto executive told TechCabal on condition of anonymity. However, the companies had received notices to pay the tax weeks before the ruling. 

DAT aimed to tax Kenya’s digital asset market, which ranks second behind Nigeria in crypto-related activities. Over 350,000 Kenyans also registered for the cryptocurrency project Worldcoin before the company’s operations were suspended in August 2023. 

Given crypto’s volatile nature, a tax based on transaction gains or income, accounting for potential costs and losses, could have been more suitable, said an executive at the Blockchain Association of Kenya (BAK). In September 2023, BAK went to court to block the new crypto taxes. However, the case is now invalid, according to Kakai. 

Other crypto experts argued that the Kenyan government could have aligned the DAT rate with the existing 1.5% Digital Service Tax (DST), which was introduced in the 2020 Finance Act. DST is a 1.5% tax on income from online marketplace services in Kenya. 

The short tax remittance deadline was also seen as a burden to taxpayers with increased compliance costs.

Three court of appeal judges ruled that sections introduced to amend the Income Tax Act, Value Added Tax Act, Excise Duty Act, Retirement Benefits Act, and Export Processing Zones Act in the 2023 Finance Bill were unconstitutional because they lacked fresh public participation.

Founded by Chinyere ‘Chi’ Nnadi, Lucas Llinás Múnera, Kate Kallot, and Dearg OBartuin in 2021, Mara was a hit with investors. In May 2022, it raised $23 million from Alameda Research, the trading arm of FTX, Coinbase Ventures, and 100 other investors at a pre-money valuation of $70 million.

In a stunning reversal of fortunes that took only two years, Mara ran out of cash, with CEO Chineyere Nnadi registering a new entity named Jara in early 2024. Two cofounders who left the company in early 2023 claim that Nnadi only established the new company, Jara to avoid responsibility for Mara’s liabilities.

“Mara could have been something extraordinary, but its CEO took it down a dark and rotten path,” those co-founders said in a note to investors.

Chinyere Nnadi did not respond to multiple requests for comments for this article.

A promising start for Mara

Flush with funding in 2022, Mara began building a crypto wallet and a layer-1 blockchain backed by Mara tokens. According to Mara’s leadership team, everything was on track when Mara Wallet launched in February 2023 with “4 million verified users.” The company also touted its community of users earning Mara tokens for educating others about crypto. 

Like many startups that raised money at the height of the Zero Interest Rate Phenomenon (ZIRP) in 2021, Mara incinerated cash at an extraordinary pace, according to internal documents seen by TechCabal.

It lost $15.9 million in 2022, according to a copy of an audited financial statement sent to investors. It didn’t report revenue because it hadn’t launched a product in 2022 yet expenses were already astronomical. Mara spent $9.1 million on salaries, bonuses, and allowances. It had 130 employees, said one person with knowledge of Mara’s operations. 

“We [paid high salaries] to attract talent [from well-paying companies like Apple and competitors like Yellow Card] but they didn’t always deliver,” Nnadi wrote in an investor report, acknowledging the company’s cash burn during its growth phase.  

With $5 million left in cash by the end of 2022, Mara began fundraising talks in 2023.

Failure to raise follow-on funding worsened problems

Mara’s timing could not have been worse. The end of ZIRP and the 2023 crypto winter made it difficult to raise cash. The departure of three of Mara’s cofounders effectively left only Nnadi running the company, and those exits spooked investors, one person claimed. 

Despite speaking to several investors for a possible $2-5 million raise, nothing materialised. 

Without fresh cash injection, Mara’s financial problems worsened. By June 2023, Mara had cut team size twice to save costs and seemed at risk of shutting down. One publication cited generous staff salaries and expensive marketing campaigns as big drains on the company’s resources. 

It owed vendors who provided technical services like compliance and communications tools over $3 million, three people with direct knowledge of the situation said. 

Those creditors are considering a Chapter 8/11 involuntary bankruptcy claim against Mara, according to communication seen by TechCabal.

Mara also faced problems with its Mara Wallet, despite its 4 million-users claim. 

“At least 75% of the 4 million verified users Mara reported it had were fraudulent accounts,” one former executive said. “The financial incentive of the company’s referral program encouraged users to create fake Mara wallet accounts.“

Bogged down by financial problems and a poorly received Mara Wallet, Nnadi registered a new crypto company called Jara. By  April 2024, Mara was no more, and in its place, there was Jara. 

“Mara no longer exists,” said a Telegram message from an anonymous community manager, who urged the nearly 10,000 users in the Mara Telegram group to download the new Jara app—a non-custodial crypto wallet. Users were told, “The company’s investors are aligned with the new vision.” 

Coinbase Ventures, one of its most prominent investors, did not immediately respond to comments.

Nnadi offered to transfer the equity of Mara’s institutional investors and the tokenised shares of nearly 100 individual investors to Jara, said two people familiar with the matter. He also claimed he invested $700,000 of his funds into Jara, the same people said.

The rebrand to Jara was to move past the “shoddy engineering work of the past and be more authentic to how Africans transact,” CEO Chinyere Nnadi told investors. In a separate memo, he also claimed an employee hired to work on the over-the-counter trading product stole $600,000 from the company’s first OTC transaction. 

However, former Mara executives have questions that may blight Jara’s new start. They claim Nnadi spent company funds with little oversight and question how money was spent. 

While the company’s 2022 financial statement showed directors earned a combined $2.6 million, it is unclear how much Nnadi drew as salary. Of five C-suite executives excluding Nnadi, three earned $170,000 each, a fourth earned $120,000 while another earned $600,000 annually. The combined earnings of those five executives were $1.23 million, suggesting Nnadi, the only executive whose salary was not disclosed may have earned as much as $1.3 million. 

There are also questions about $500,000 donated to Mara Foundation, the startup’s non-profit arm. “The Swiss government has formally launched action against the Mara Foundation,” one former executive wrote to investors. TechCabal could not independently verify that claim.

At least two former executives also claim creating Jara is a way to avoid Mara’s liabilities.

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Gambrayan and his colleague Nadeem Anjarwallar were given 48 hours to make that payment after meeting with Nigerian legislators. Following the payment request, Gamabaryan left Nigeria hurriedly and shared a three-page document describing the request with Binance lawyers and the company’s contacts in the Nigerian government. 

He came back to Nigeria a month later with Nadeem Anjarwalla, his colleague at Binance. That was the last time both Binance staff were free men after they were arrested in February for tax evasion and money laundering charges. Anjarwalla fled an Abuja hotel where he was held before the trial in March. 

Nigerian officials also threatened to arrest Richard Teng, the CEO of Binance. 

The arrest of Gambrayan and Anjarwalla set off a series of events in Nigeria after the country declared crypto a “national security” issue. Binance has since left the country as the company’s website has been blocked in Nigeria.

Since then, Nigerian authorities have clamped down on cryptocurrencies as they believe that crypto traders use centralised exchanges to manipulate the country’s exchange rate. The SEC also told crypto traders on Monday that they should stop peer-to-peer trading on crypto platforms. 

Instead, it showed that the SEC, widely considered one of the country’s more progressive regulators, also believes that a handful of retail crypto traders are to blame for the volatility in the FX market. 

“What is very critical and which has brought about this meeting is the concerns regarding crypto P2P traders and their effect on the exchange rate,” said Emomotimi Agama, the recently appointed Director General of the SEC. 

He reiterated the need for crypto exchanges to delist naira from p2p trading pairs, a decision many had implemented in March 2024 after scrutiny of Binance began. 

‘We ask that those involved in sharp practices that undermine national interest should cease and desist.”

The DG spent the first thirty minutes pleading with crypto traders using the P2P method to stop, citing the same national security concerns that have formed the core of the argument for a ban. 

“One of the things that needs to happen to save this space is the delisting of the naira on peer-to-peer platforms.”

He encouraged the industry to root out “bad actors” giving the industry a bad reputation by naming and shaming them.

And if an appeal to patriotism was insufficient, the SEC threw the industry a bone by promising it would not draft any regulation without its contribution. Some 300 guests were asked to share ideas and concerns that could help the regulator decide how to regulate Nigeria’s crypto market. 

“We have an open door policy towards all that mean well for this country, especially in the fintech community.”

Ultimately, the crypto traders asked that the SEC set up a working committee and give them a month to prepare proposals.

While it’s clear some type of regulation is coming, this meeting served only one purpose: to give the semblance of a regulator working with the industry to find a way forward. The fears over a p2p ban are very much alive. 

Nigerian authorities asked the Kenyan government to arrest and extradite Anjarwalla three weeks ago, people familiar with the matter said. So far, Nairobi has only confirmed his presence in the country, slowing down the West African nation’s case against crypto giant Binance.

According to Kenyan law, an extradition request sent to the Attorney General can only be executed through the Directorate of Public Prosecution (DPP) after receiving an arrest warrant from a magistrate court.  

Top Kenyan officials, including Resila Onyango, the spokesperson for the National Police Service (NPS) told TechCabal on Tuesday they were unaware of the arrest. Two other officials who asked not to be named called reports that first appeared in Nigeria’s The Punch rumours.

Crypto publication Coindesk also reported on Monday that Anjarwalla’s wife denied news of the extradition.

A high-ranking detective at Kenya’s Directorate of Criminal Investigation (DCI), with direct knowledge of Nigeria’s extradition request through Interpol, also claimed no arrest had been made as alleged.

“They are piling pressure, but he has not been arrested as reported. The process is lengthy and cannot be done without involving other agencies. Interpol cannot arrest a Kenyan without following the law,” the investigator told TechCabal.

According to international laws on extradition, while Interpol, the international police organisation, enables information sharing among law enforcement agencies in over 190 countries, it cannot execute arrest warrants.

The confusion around the whereabouts of Anjarwalla and extradition is similar to an incident involving Nigerian national Nnamdi Kanu, who was arrested in Nairobi in 2021 and sent to Nigeria to face terrorism charges. Kenyan officials denied any involvement in the extraordinary rendition.

However, Anjarwalla’s case is more complex because he holds a Kenyan passport, which he reportedly used after his escape from Nigeria. 

If arrested, the Binance boss can fight the extradition in court, which could take months or years.  

Nigeria’s Federal Inland Revenue Service (FIRS) has accused Anjarwalla and another Binance executive, Tigran Gambaryan, of failing to register the crypto exchange with it for tax purposes.  

FIRS said in court filings that Binance failed to deduct Value Added Tax (VAT) and aided users in evading taxes through its platform. Binance and the executives have denied the claims. 

Gambrayan is still in custody and has pled not guilty to money laundering charges, Nadeem escaped from an Abuja guest house where he was held and escaped to Kenya before he was arraigned. 

On Monday afternoon, the Financial Sector Conduct Authority (FSCA) approved 16 extra licences, bringing the number of licenced crypto companies to 75 from. The FSCA received 374 applications. 

Luno and VALR, two global crypto exchanges, are the most recognisable names on the list.

Luno’s license allows the company to provide crypto advisory and intermediary services while VALR’s license allows the company to provide advisory, intermediary and investment management services. 

Binance, one of the biggest global crypto exchanges, did not make the list. 

The move signals South Africa’s continuing acceptance of the crypto regulatory environment. And with the regulator expected to approve even more licences, it will position South Africa as one of the continent’s crypto-forward countries.

“Any entity that did not apply for a license and continues activities will be investigated and there will be consequences for such actions,” said Felicity Mabaso, the divisional executive for licensing at the FSCA.

The licensed entities will be subject to ongoing supervision after licensing, while investigations into people conducting crypto-related financial services without authorisation will begin.

The licences were granted to crypto companies with diverse business models, including advisory services, exchanges, payment gateways, crypto-to-crypto and crypto-to-fiat conversion, crypto asset arbitrage, tokenisation, provision of index-based products, and wallet services.

*This is a developing story

One cryptocurrency exchange told TechCabal that operators received the draft proposal on Friday. The SEC first shared the draft on virtual asset providers in 2022 and, at the time, proposed N500 million in minimum paid-up capital.

“Our SEC has indirectly told the community that this game is for the big boys,” said Rume Ophi, a crypto expert. 

A crypto exchange operator who asked not to be named told TechCabal believes local operators should unanimously reject the proposal. 

“This proposal locks out a lot of local players. I suspect at the end of the day that the foreign-owned companies will dominate the crypto space in Nigeria,” said Tim Akimbo, a Bitcoin expert. 

Apart from the N1 billion minimum paid-up capital, virtual asset companies must also provide current Fidelity Bond covering at least 25% of the minimum paid-up capital.

A fidelity bond is a type of insurance that offers business protection against losses caused by employees who commit fraud, theft, and forgery. The rules also allow the SEC to, at any time, impose additional financial requirements on the digital asset operator commensurate with the nature, operations, and risks posed by the company. 

The commission also increased the number of additional documents required for registration. The new rules require “a sworn undertaking that the applicant will be able to operate an orderly, fair, and transparent market in relation to the securities including derivatives that are offered or traded, on or through its platform.” 

Gambrayan, who leads the Binance criminal investigations team, and his colleague arrived in Nigeria one week after telecom companies were told to block the websites of several crypto exchanges. According to several reports, they were arrested on their arrival in Abuja, with their passports seized. The government has shared very little about their arrests, and it is unclear if they have or will be charged in court.

Their arrests are in connection with a push by the Nigerian government to halt speculation on forex trading, following volatility in the price of the naira. After a decision to remove artificial controls, the naira’s plunge only worsened.

Regulators have historically blamed those plunges on speculators. At one point, it blamed Abokifx, a website that published FX rates.

The Central Bank has also pointed fingers at Bureau de Change operators and the banks. Several policy changes by Olayemi Cardoso, the CBN chief appointed last year, have purportedly aimed to stop such speculation.

Of these speculators, none has quite been treated like Binance. In a press briefing after a February monetary policy meeting, Cardoso claimed $26 billion of suspicious monies had passed through Binance.

It provided a justification for the government to make the arrests.

Several reports claimed the government asked for data on Binance users, while claims of a $10 billion fine were later denied.

The global crypto exchange has responded by suspending all trades in naira but has not publicly responded to the arrests otherwise.

“There’s no definite answer for anything: how’s he’s doing, what’s going to happen to him, when he’s coming back,” Wired quotes Gambaryan’s wife, Yuki Gambaryan, as saying.