Thomas Daniels
Nigeria Mandates VASPs to Comply with New Crypto Regulations
The Nigerian Securities and Exchange Commission (SEC) has issued a 30-day ultimatum for Virtual Asset Service Providers (VASPs) to align with newly revised digital asset regulations.
The SEC’s directive aims to reinforce Nigeria’s regulatory framework governing digital asset issuance, exchange, offering platforms, and custody. The initiative reflects Nigeria’s intent to ensure the regulatory environment is robust and responsive to the dynamic digital asset market.
Accelerated Regulatory Incubation Programme (ARIP)
In a public notice, the SEC unveiled the Accelerated Regulatory Incubation Programme (ARIP), a bespoke compliance framework designed for VASPs. This initiative offers a structured path for VASPs to meet the new regulatory standards. A designated onboarding window has been established to assist VASPs in participating in ARIP.
Enforcement actions will commence against non-compliant VASPs at the conclusion of the 30-day period, as per the SEC’s guidelines. This measure underscores the SEC’s commitment to maintaining regulatory compliance within Nigeria’s burgeoning cryptocurrency sector.
Increasing Regulatory Fees
In a notable development under the new regulations, the registration fee for crypto exchanges is proposed to rise substantially—from 30 million naira ($18,620) to 150 million naira ($93,000). This adjustment, alongside the SEC’s other regulatory changes, aligns with the broader strategy to refine oversight mechanisms.
Coordinated Regulatory Efforts
The Central Bank of Nigeria (CBN) complements these SEC updates by issuing guidelines on banking relationships and account operations for VASPs. This concerted approach illustrates Nigeria’s strategy to regulate the virtual asset sector proactively rather than resorting to blanket prohibitions.
Evolution from Ban to Taxation
Nigeria’s regulatory stance on cryptocurrencies has evolved significantly since 2021. Initially, the Central Bank imposed restrictions on banks from facilitating cryptocurrency transactions, driven by concerns over financial crimes. Despite this, cryptocurrency adoption surged, prompting a shift towards regulation and taxation.
Timeline of Key Developments:
- Feb. 5, 2021: CBN directs closure of bank accounts associated with cryptocurrency transactions.
- Feb. 9, 2021: CBN begins investigating financial institutions aiding cryptocurrency trading.
- Feb. 11, 2021: Nigerian Senate reviews cryptocurrency impacts on national economy and security.
- Feb. 18, 2021: IMF endorses CBN’s caution against cryptocurrency risks.
- Feb. 22, 2021: SEC highlights the necessity for cryptocurrency regulation.
- Feb. 26, 2021: CBN clarifies individuals can trade cryptocurrencies, but not via Nigerian banks or fintech.
- April 7, 2022: SEC classifies digital assets as securities, issuing detailed regulatory guidelines.
- April 15, 2021: Ongoing SEC-CBN discussions on cryptocurrency regulations.
- April 26, 2021: EFCC warns against Bitcoin investments.
- July 22, 2021: CBN announces the “eNaira” CBDC plan.
- Oct. 25, 2021: Nigeria launches the “eNaira.”
- Dec. 2, 2022: Finance Minister Zainab Ahmed reveals plans to tax digital assets.
- May 28, 2023: 10% tax on digital asset gains enacted in the 2023 finance bill.
Despite regulatory hurdles, Nigeria remains a global frontrunner in cryptocurrency adoption. Between July 2022 and June 2023, the nation recorded a 9% year-over-year increase in crypto transaction volumes, reaching $56.7 billion.
