Earlier this year in March, the Nigerian Securities and Exchange Commission (SEC) made substantial updates to its regulations on Digital Assets Issuance, Offering Platforms, Exchange, and Custody. One notable change was the significant hike in Virtual Asset Service Provider (VASP) registration fees, which surged from 30 million naira ($20,161) to a staggering 150 million naira ($100,806). This move aims at promoting financial stability but instead raises concerns about potentially deterring business involvement.
On June 21, the SEC introduced another major amendment: the Accelerated Regulatory Incubation Program (ARIP). This program provides a 30-day “exclusive window” for existing and prospective VASPs in Nigeria to comply with all regulatory requirements. Non-compliance by the end of this period would result in immediate prosecution. The SEC has directed all concerned parties to use its ePortal to commence the ARIP, emphasizing its commitment to regulatory compliance.
Leadership and Policy Shifts
These directives come shortly after Emomotimi Agama assumed the role of director-general of the Nigerian SEC in April. Known for his pro-crypto stance, Agama quickly faced friction with the expanding crypto community in Sub-Saharan Africa. In May, Agama led a crackdown on the use of the Nigerian Naira on crypto exchanges, driven by government concerns over the currency’s severe devaluation over the past year. Consequently, major exchanges like KuCoin and Binance delisted the Naira from their platforms.
Historical Context and Future Implications
Despite past regulatory challenges, Nigeria has experienced significant growth in cryptocurrency adoption. In December 2023, the Central Bank of Nigeria (CBN) lifted its 2021 ban on crypto transactions, introducing new guidelines to combat money laundering and terrorist financing. These guidelines mandate VASPs to adhere to Know Your Customer (KYC) requirements, although concerns about user privacy remain.
The Mixed Regulatory Environment
Regardless of the two-year ban lifted on banks holding accounts for VASPs in December 2023, Nigeria continues to enforce stringent measures on cryptocurrency operations. Microfinance banks still face restrictions in facilitating crypto trading transactions. The steep registration fee hikes and the ARIP program suggest Nigeria is leaning towards a highly regulated crypto environment.
Nigeria is emerging as a significant crypto hub with around 22 million active crypto owners, accounting for approximately 10.3% of its population. The mixed signals from the government indicate an effort to balance control with the increasing interest in cryptocurrency within the nation.
Global Context of Cryptocurrency Adoption
Globally, cryptocurrency adoption is on the rise. As of 2024, data from Triple. A indicates that 6.8% of the world’s population owns cryptocurrencies, equating to over 560 million users. Nigeria, with a cryptocurrency ownership rate of 6.50%, is a notable player in this growing trend, reflecting its rising acceptance and influence in the global crypto landscape.
SEC’s New Crypto Regulation
In a public statement, the Nigerian SEC explained that the recent amendments aim to build a stronger regulatory framework tailored to the specific challenges of digital asset markets. The revised rules seek to address the complexities and risks associated with digital assets, ensuring a secure, well-regulated environment for all stakeholders.
“The purpose of the amendment is to expand the scope of regulation in line with the current realities.”
SEC Spokeperson
The introduction of the ARIP is a significant part of these efforts, providing a structured process for VASPs to meet new regulatory requirements. SEC’s crypto regulations simplify this process by establishing a dedicated application window on its ePortal for ARIP participants, with a mandatory completion period of 30 days from the issuance of the circular.
Conclusion
The Nigerian SEC’s recent initiatives reflect a clear intent to streamline the regulatory environment for virtual asset service providers while maintaining stringent oversight. As the crypto market continues to evolve, the SEC’s crypto regulations could serve as a model for other nations, including the United States, to navigate the complex landscape of digital asset regulation amid rapid adoption.
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