Nigeria’s Securities and Exchange Commission (SEC) has set a 30-day deadline for cryptocurrency exchanges and digital asset traders to re-register their operations, cautioning that enforcement measures will be taken against those who fail to comply. The Accelerated Regulatory Incubation Program (ARIP) for Virtual Assets Service Providers (VASPs) was introduced by the SEC to modernize the rules governing digital asset issuance, trading platforms, exchanges, and custody to better reflect current industry practices. The authority made it clear that all current and prospective VASPs must complete the application process via the SEC ePortal within 30 days from the issuance of the directive.
Despite Nigeria’s standing as the second-ranked country in Chainalysis’ Global Crypto Adoption Index in 2023, a significant increase from its previous ranking at 11, concerns are mounting regarding the safety and legitimacy of digital assets. The Central Bank of Nigeria (CBN) had imposed a ban for over two years on banks facilitating cryptocurrency transactions. In response to the rapid rise in crypto adoption, the SEC is now taking a stricter stance on regulating the industry to combat potential risks and safeguard investor interests. Recent warnings from the SEC about fraudulent activities associated with crypto exchanges like Binance highlight the susceptibility of the market to exploitation.
Earlier this year, Nigerian authorities accused platforms such as Binance of contributing to money laundering and manipulating the foreign exchange market, following a shift in public preference towards digital currencies over the national currency. The resultant devaluation of the naira has prompted government agencies like the Economic and Financial Crimes Commission (EFCC) and the Federal Inland Revenue Service (FIRS) to crack down on exchanges involved in peer-to-peer trading. Executives from Binance were even detained on charges of tax evasion and money laundering, underscoring the government’s firm stance against illicit activities in the crypto space.
Despite the regulatory hurdles and legal challenges faced by Nigeria’s crypto market, there remains optimism surrounding its potential for economic growth and innovation. The International Monetary Fund (IMF) has recommended the implementation of a comprehensive regulatory framework to address the country’s economic issues through the responsible management of digital assets. In line with this vision, the SEC is exploring avenues for tokenization and plans to pilot a controlled liquidity pool comprising tokenized financial instruments. The Commission’s dedication to imposing stricter regulations signifies a broader commitment to upholding the integrity and security of the financial system amidst the evolving landscape of digital assets.
The upcoming deadline for crypto exchanges and VASPs in Nigeria signals a pivotal moment for the industry, necessitating a balance between regulatory oversight and fostering innovation in the digital asset space.
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