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, warning of enforcement action against non-compliance.
In a June 21 statement, the SEC announced the start of the Accelerated Regulatory Incubation Program (ARIP) for Virtual Assets Service Providers (VASPs). The program is part of the Commission’s efforts to amend existing rules on digital asset issuance, platform provision, exchanges and custody to better reflect current industry trends.
The regulator stated:
“All operational and prospective VASPs are hereby requested to visit the SEC ePortal to complete the application process no later than 30 days from the date of this circular.”
Nigeria has seen significant growth in cryptocurrency adoption, ranking second on Chainalysis’ Global Crypto Adoption Index in 2023, up from 11th the year before. The increasing adoption occurred despite a two-year ban by the Central Bank of Nigeria (CBN) on banks facilitating crypto transactions.
The SEC’s directive comes amid increasing scrutiny and skepticism toward digital assets. In June 2023, the SEC warned of a fraudulent entity misusing the name crypto exchange Binance, highlighting the high risks associated with digital assets that could lead to total investment losses.
Devaluation of the Fiat currency
Earlier this year, Nigerian authorities accused exchanges like Binance of facilitating money laundering and influencing the foreign exchange market after locals started preferring digital currencies to the naira.
The growing adoption further exacerbated the devaluation of the fiat currency amid the country’s economic woes, prompting the government to crack down on exchanges that facilitated trading through peer-to-peer markets.
The Economic and Financial Crimes Commission (EFCC) and the Federal Inland Revenue Service (FIRS) have accused Binance executives of tax evasion and money laundering. They were held for weeks before the charges were dropped.
Despite these challenges, the Nigerian crypto market remains vibrant and the IMF has recommended that the country implement a comprehensive regulatory regime for the sector to resolve some of its economic problems. The SEC is also exploring tokenization, with plans to test an authorized liquidity pool consisting of tokenized bonds and deposits.
The Commission’s push for stricter regulation reflects a broader effort to ensure the integrity and stability of the financial system amid the rapid development of digital assets.