Nigeria Embraces Cryptocurrency with Regulatory Approvals

SEC Grants Initial Approvals to Crypto Operators

SEC Grants Initial Approvals to Crypto Operators

Nigeria has taken a major step toward embracing cryptocurrency, with the Securities and Exchange Commission (SEC) granting preliminary operational approvals to several crypto firms. This move is a clear indication that the country is opening up to digital currencies, setting a new regulatory tone in the financial sector.

On Thursday, the SEC revealed that it had issued “approval-in-principle” to two Digital Asset Exchanges as part of its Accelerated Regulatory Incubation Program (ARIP). In addition to this, five other companies have been allowed to test their business models and technologies under the Regulatory Incubation Program (RI).

Accelerated Regulatory Incubation Program: A Pathway for Digital Assets

The firms receiving these approvals include Busha Digital Limited, Quidax Technologies Limited, Trovotech Ltd, Wrapped CBDC Ltd, HousingExchange.NG Ltd, Dream City Capital, and Blockvault Custodian Ltd. The ARIP is designed to integrate companies that were already operational before the introduction of the Rules on Virtual Asset Service Providers in May 2022. The RI Program, on the other hand, is meant to allow these digital asset firms to fine-tune their offerings under close regulatory supervision.

This development comes on the heels of a recent statement by Zacch Adedeji, chairman of the Federal Inland Revenue Service (FIRS). Adedeji mentioned that the government is drafting an executive bill to modernize revenue collection, which will include provisions for regulating the cryptocurrency sector.

Impact on Nigeria’s Crypto Market and Economy

Despite the SEC’s recent approvals, the road to regulation has not been smooth. Earlier this year, there were stringent actions against the crypto sector, particularly following the Central Bank of Nigeria’s (CBN) decision to lift its ban on official cryptocurrency transactions in December 2023. The government had previously cracked down on crypto operators, blaming them for economic issues such as naira devaluation, tax evasion, and the financing of illicit activities.

The SEC has clarified that these initial approvals are just the beginning, with full licensing expected to follow. This development makes Busha Digital Limited and Quidax Technologies Limited the first officially sanctioned crypto operators in Nigeria.

Michael Adeyeri, CEO of Busha, expressed pride in the accomplishment, stating that the firm has been rigorously ensuring its systems meet security and compliance standards over the past five years.

Nigeria’s crypto market is one of the largest peer-to-peer (P2P) markets in the world. According to data from Chainalysis, transactions in the country amounted to $56.7 billion between July 2022 and June 2023.

Experts believe that formal regulation of the cryptocurrency market will have far-reaching benefits for Nigeria. Senator Ihenyen, a prominent figure in blockchain law, emphasized that pushing digital assets underground is no longer feasible. He suggested that a coordinated effort by regulators is essential to protect consumers and investors alike.

The SEC further outlined that the recently approved group includes two Digital Asset Exchanges, four Digital Asset Offering Platforms, and one Digital Asset Custodian. Additional applications to the ARIP and RI Programs are still under review, with approvals to be granted as requirements are met.

In its statement, the SEC reiterated that only authorized digital exchanges and platforms are legally permitted to operate in Nigeria’s crypto market. The ARIP and RI Programs are currently the sole avenues for bringing new digital products and services into the country’s capital market legally.

This regulatory shift underscores the Nigerian government’s commitment to establishing a clear framework for cryptocurrency operations. Following the CBN’s decision to hand over regulatory oversight to the SEC, the commission has also pledged to monitor the trading activities of Virtual Asset Service Providers (VASPs) as part of its ongoing oversight efforts.