Nigeria’s Securities and Exchange Commission (SEC) has issued a 30-day ultimatum for crypto exchanges and digital asset traders to re-register their businesses. This move comes as part of the Accelerated Regulatory Incubation Program (ARIP) for Virtual Assets Service Providers (VASPs) aimed at aligning existing rules with current industry trends. The SEC’s directive requires all operating and prospective VASPs to complete the application process on the SEC ePortal within the stipulated time frame. Failure to comply may result in enforcement actions being taken against those who do not re-register.
Despite significant growth in crypto adoption in Nigeria, there have been challenges along the way. The country ranked second on Chainalysis’ Global Crypto Adoption Index in 2023, showcasing a rapid increase in adoption. However, this growth has been met with skepticism and scrutiny by regulatory authorities. The Central Bank of Nigeria (CBN) previously imposed a two-year ban on banks facilitating crypto transactions, and the SEC has warned against fraudulent entities misusing the names of legitimate crypto exchanges like Binance. This hostile regulatory environment has led to accusations of money laundering and influencing the foreign exchange market against exchanges by Nigerian authorities.
The government’s crackdown on exchanges facilitating crypto trades intensified as the local populace began favoring digital currencies over the national currency, the naira. The Economic and Financial Crimes Commission (EFCC) and the Federal Inland Revenue Service (FIRS) even detained Binance executives on charges of tax evasion and money laundering. Despite these challenges, Nigeria’s crypto market has remained vibrant, prompting the International Monetary Fund (IMF) to recommend the adoption of a comprehensive regulatory regime to address economic problems. The SEC is also exploring tokenization and plans to pilot a permissioned liquidity pool comprising tokenized bonds and deposits to further regulate the industry.
The SEC’s efforts to introduce stricter regulations reflect a broader commitment to ensuring the integrity and stability of the financial system amidst the evolving landscape of digital assets. As Nigeria continues to navigate the challenges and opportunities presented by cryptocurrency adoption, regulatory clarity and enforcement will be crucial in shaping the future of the country’s crypto market. By re-registering VASPs and implementing tighter controls, the SEC aims to create a more secure and compliant environment for digital asset trading in Nigeria.
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