Cryptocurrency exchanges and digital asset traders in Nigeria are facing increased scrutiny from the country’s Securities and Exchange Commission (SEC). The SEC has issued a 30-day ultimatum for these businesses to re-register, with enforcement actions threatened for non-compliance. This move comes as part of the Accelerated Regulatory Incubation Program (ARIP) for Virtual Assets Service Providers (VASPs) initiated by the SEC. The goal of this program is to update regulations on digital assets issuance, offering platforms, exchanges, and custody to align with current industry trends.
Despite facing challenges such as a ban on banks facilitating crypto transactions by the Central Bank of Nigeria (CBN), the country has seen significant growth in cryptocurrency adoption. In fact, Nigeria ranked second on Chainalysis’ Global Crypto Adoption Index in 2023, showing a major jump from its 11th place ranking the previous year. This rise in adoption has put pressure on regulators to address the increasing use of digital currencies among the populace.
The SEC’s recent directive on re-registration follows a series of events that have brought cryptocurrency activities in Nigeria under public scrutiny. The regulator has warned against fraudulent entities misusing the names of popular exchanges like Binance, citing high risks associated with digital assets that could result in substantial investment losses. Additionally, Nigerian authorities have accused exchanges like Binance of facilitating money laundering and influencing the foreign exchange market, leading to a crackdown on peer-to-peer cryptocurrency trading.
Despite the challenges faced by the cryptocurrency market in Nigeria, there is a growing recognition of the potential benefits of regulating the industry. The International Monetary Fund (IMF) has recommended that Nigeria adopt a comprehensive regulatory regime for cryptocurrencies to address some of its economic problems. The SEC’s exploration of tokenization and plans to pilot a permissioned liquidity pool for tokenized bonds and deposits demonstrate a commitment to adapting to the changing landscape of digital assets.
The SEC’s push for stricter regulations reflects a broader effort to safeguard the integrity and stability of Nigeria’s financial system amid the rapid evolution of digital assets. With the cryptocurrency market remaining vibrant despite ongoing challenges, the need for clear and effective regulations has become increasingly apparent. By taking proactive steps to address issues such as money laundering and fraud, regulators aim to create a safer environment for cryptocurrency traders and investors in Nigeria.
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