Regulation
Nigerian SEC Gives Cryptocurrency Firms 30 Days to Register
Nigerian regulators seem to have paid a lot of attention to the cryptocurrency sector in recent times. With the country’s persistent economic and currency problems, it seems the government is looking at every possible way to address the issue, and that includes tightening the reins on cryptocurrency companies and the movement of digital assets in the country.
This is happening despite the innovative ways in which cryptocurrencies have revolutionized several industries and can now be used all over the world. For example, cryptocurrencies can now be used to finance travel, buy a car, buy clothes, and play and bet on games such as roulette and online blackjack. The advantages of using it for such purchases, especially for gambling, are anonymity, speed and global accessibility.
However, even the growing global adoption of cryptocurrencies has not stopped the Nigerian government from taking steps to limit, regulate, and monitor their use. The Securities and Exchange Commission (SEC) has just issued a directive requiring cryptocurrency companies and digital traders to register their activities within thirty days. In a declaration In a statement released on June 21, the agency said that companies that do not comply with the new directive risk facing enforcement action.
The directive specifically applies to cryptocurrency exchanges and digital asset traders and comes on the heels of a new program from the agency. The Accelerated Regulatory Incubation Program (ARIP) for Virtual Assets Service Providers (VASP) was launched to amend the current rules on digital asset issuance, offering platforms, exchanges, and ownership for Virtual Asset Service Providers (VASPs) and better align them with industry standards.
Despite being a relatively new sector, cryptocurrency is already pervading every sector and industry and offers a new way for innovative businesses such as online ones anonymous casinos and e-commerce stores to operate. However, these new developments may now be in play with the new SEC ruling.
New program for cryptocurrency regulation
The SEC has provided a portal for potential virtual asset service providers to complete their application process. In the accompanying framework document, the agency outlines three primary goals of the Accelerated Regulatory Incubation Program (ARIP).
ARIP aims to provide participants with the opportunity to receive guidance on Commission regulations before becoming fully operational in the capital market, while also allowing the Commission to understand the business models of digital assets. This mutual understanding would enable it to adequately address issues related to market integrity, investor protection and money laundering.
However, the main objective of the programme is to accelerate the integration of entities that have submitted their applications and to allow those that are qualified to obtain “approval in principle” from the Commission, pending the entry into force of the more robust rules on digital activities.
The SEC has set a processing fee of two million naira (about $1,400) for the application and a fine of 20 million naira for any VASP found operating without the required registration. This new directive has sparked mixed reactions from the public, with many reacting with skepticism. For them, the Commission is subtly cracking down on the cryptocurrency industry.
Government crackdown on cryptocurrencies
Nigeria has a thriving cryptocurrency sector, driven primarily by its young population. In 2021, the country’s apex financial institution, the Central Bank of Nigeria, issued a statement ban banks and financial institutions to facilitate cryptocurrency transactions. Although the ban has been lifted, its imposition signaled hostility toward the industry.
It is worth noting that despite the ban being in place for more than two years, Nigeria’s cryptocurrency industry has continued to grow, which may have been the catalyst for another hostile move by the government in recent times. The government has accused cryptocurrency exchanges of being a conduit for manipulating the country’s forex market and laundering money.
In March 2024, the Federal Inland Revenue Service (FIRS) charged cryptocurrency exchange Binance and two of its executives with tax evasion. Less than a week later, the country’s financial crimes watchdog, the Economic Financial Crimes Commission (EFCC), charged the executives with money laundering, and one of the executives was arrested.
There also appears to be a fear of cryptocurrency volatility. In the past, the Securities and Exchange Commission has issued warnings about the “extremely risky” nature of cryptocurrencies, warning citizens that they could lose all of their cryptocurrency investments. This fear has been further fueled by the Bitcoin’s crash continuesthe most adopted cryptocurrency.
While the government appears concerned about the effect of lost cryptocurrency investments on its citizens, other government actions suggest a strong bias against the industry. Earlier this year, the National Security Advisor classified cryptocurrency trading as a threat to national security, ordering some fintechs in the country to block accounts that were trading in cryptocurrencies. Telecom providers have also been instructed to disable access to cryptocurrency exchanges. This does not signal a willingness to support the growth of the industry.
Despite the ongoing challenges, the Nigerian crypto space continues to grow, with peer-to-peer trading platforms and social media serving as points of interaction. The industry’s resilience against the harsh directives of government agencies has likely inspired this new approach to regulating the industry. Adopting a robust cryptocurrency regulatory system could help curb some of the irregularities that the government seems really bogged down with.
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