Regulation
Nigeria to Make Local Offices and Leadership Mandatory for Cryptocurrency Firms Seeking Licensing Under New Regime
The Securities and Exchange Commission (SEC) of Nigeria has introduced stringent guidelines for Virtual Asset Service Providers (VASPs) to establish a local office in Nigeria as part of its new regulatory framework for incubation.
Furthermore, the guidelines, detailed in the recently published document “SEC Regulatory Incubation Guidelines” — requires all fintech entrepreneurs, especially those involved in virtual assets, to have a physical presence in Nigeria. The clause includes leadership roles in companies, including CEOs.
The new requirements are part of a broader initiative to ensure tighter regulatory oversight and support for local market development.
The move comes after the country struggled to maintain the value of its local fiat currency amid a local boom in cryptocurrency adoption, which has left the country struggling. pressure on the Naira.
Key provisions for VASPs
Pre-qualification requirements include that candidates must have an office in Nigeria to facilitate regulatory oversight and customer interaction. They must leverage innovative technology to offer new or improved financial services or products.
The business must be a financial services entity regulated by the SEC. Applicants must be ready to begin trading with live customers and must commit to seeking full registration as soon as the necessary rules are established.
The product or service should solve a specific problem or provide significant benefits to consumers or the industry. Products must be investor-safe, and companies must complete a FinTech assessment form and engage with the SEC at an early stage.
The operational requirements state that candidates must demonstrate suitability and relevant skills in financial services and/or technology. Firms must provide complete customer information and regularly update the SEC, ensuring compliance with all relevant laws and regulations.
Compliance with anti-money laundering and anti-terrorism requirements is mandatory. Procedures for holding and controlling client assets must be clearly defined and monthly reports must be submitted to the SEC.
Restrictions and conditions
Regulatory incubated VASPs are subject to specific restrictions, including a ban on guaranteeing returns on financial promotions and a limit on the number of clients they can accommodate.
The incubation period is limited to one year, after which companies must apply for full registration or cease operations if they do not meet the eligibility criteria.
The SEC reserves the right to terminate a company’s participation in the regulatory incubation process if it no longer meets the eligibility criteria, violates restrictions or conditions, deviates from its implementation plan, or fails to file for registration or submit a notice of termination after one year.
Applicants must submit a detailed implementation plan that outlines the business model, goals, timeline, risk management framework, and customer communication strategies. This plan should also include steps to manage the end of the incubation period, either through a successful registration or an exit strategy.