Nigeria is taking steps to tighten its grip on the cryptocurrency industry by adjusting its regulations for crypto operators.
This move comes amid the country’s ongoing clampdown on crypto activities, particularly those involving Binance.
Recently, the Securities and Exchange Commission (SEC) released a document titled ‘Proposed Major Amendment to the Rules on Issuance, Offering Platforms and Custody of Digital Assets to stakeholders and the general public.’
The document, first released in 2022 as ‘Rules on Issuance, Offering Platforms and Custody of Digital Assets, ‘ has now been changed to ‘Rules on Digital Assets Issuance, Offering Platforms, Exchange and Custody. ‘
A key change in the adjusted regulations is the mandatory registration with the SEC for any individual or entity providing virtual assets services.
Also, companies seeking to operate as virtual assets service providers (VASP) must be incorporated and have an office in the country. SEC also expects the chief executive officer/managing director or a similar role in such firms to reside in Nigeria.
The revised regulations also significantly increased the amount for the registration of Digital Assets Offering Platforms (DAOPs). The filing and application fee that used to be N100,000 is now N300,000, the processing fee is now N1 million (up from N300,000), the registration fee has been jacked up to N150 million from N30 million, and the sponsored individual fee is now N300,000 (previously N100,000).
“Evidence of required minimum paid-up capital — N1,000,000,000 (i.e., bank balances, fixed assets, or not nvestment in quoted securities),” the commission added. Formerly, the minimum paid-up capital was N500 million.
Nigeria’s growing digital asset activity prompted the SEC to provide regulatory clarity in 2021. According to Chainalysis, Nigeria ranks among Africa’s largest crypto markets, with a transaction volume of $56.7 billion between July 2022 and June 2023.
After banning crypto transactions in the official banking sector in 2021, the Central Bank of Nigeria adopted a more regulatory approach in December 2023 by issuing operational guidelines.
SEC’s adjusted regulation aims to set the tone for the crypto industry, facing recent uncertainty. However, operators believe some of its requirements are out of touch with reality.
“I can understand the desire for a physical presence. But many of these crypto companies do not plan on having physical locations like banks for now, so I do not see how that will work out,” a crypto exchange operator who asked not to be named said.
Regarding the increased fees, Obinna Iwuno, president of the Stakeholders in Blockchain Technology Association of Nigeria, questioned whether local markets were considered before the fee was fixed.
“With the fee that was raised, was the interest of the local players captured? Is there a regime that separates the local players from the foreign ones? Because if there isn’t, the market will become foreign-controlled.”
Ray Youssef, chief executive officer of NoOnes, a crypto exchange, said: “A five times increase in licence costs always means the same thing no matter where or when it happens. The government is trying to squeeze innovation out of the space.”
Operators in the space told BusinessDay that the revised guideline is a step in the right direction but needs more work for it to be more nuanced.
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