Nigeria’s Securities and Exchange Commission (SEC) has recently issued a 30-day ultimatum for crypto exchanges and digital asset traders to re-register their businesses. This ultimatum is part of the Accelerated Regulatory Incubation Program (ARIP) for Virtual Assets Service Providers (VASPs) initiated by the SEC.
Despite facing challenges such as a two-year ban on banks facilitating crypto transactions by the Central Bank of Nigeria (CBN), Nigeria has experienced significant growth in crypto adoption. The country ranked second on Chainalysis’ Global Crypto Adoption Index in 2023, which is a substantial improvement from its previous ranking of 11.
The SEC issued a warning in June 2023 against a fraudulent entity misusing the name of popular crypto exchange Binance. This warning underscores the regulator’s concerns about the high risks associated with digital assets, which could potentially result in significant investment losses.
In response to the increasing adoption of digital currencies over the local naira, Nigerian authorities have accused exchanges like Binance of facilitating money laundering and influencing the foreign exchange market. This has led to crackdowns by agencies such as the Economic and Financial Crimes Commission (EFCC) and the Federal Inland Revenue Service (FIRS) on crypto exchanges.
Despite these challenges, Nigeria’s crypto market remains vibrant, and the International Monetary Fund (IMF) has recommended that the country adopt a comprehensive regulatory regime for the industry to address some of its economic issues. The SEC is exploring tokenization and plans to pilot a permissioned liquidity pool consisting of tokenized bonds and deposits to further regulate the industry.
The SEC’s push for stricter regulations reflects a broader effort to ensure the integrity and stability of the financial system in Nigeria amidst the rapid evolution of digital assets. The Commission aims to align its rules on digital assets issuance, offering platforms, exchanges, and custody with current industry trends to maintain control over the growing crypto market.