Nigeria Issues 30-Day Ultimatum for VASPs to Comply with New Regulations

Nigeria Updates Crypto Regulations

The Nigerian Securities and Exchange Commission (SEC) has mandated that Virtual Asset Service Providers (VASPs) update their applications within 30 days to comply with new regulations concerning digital asset issuance, offering platforms, exchanges, and custody. This directive is part of Nigeria’s broader effort to enhance oversight of its rapidly growing cryptocurrency market.

New Regulatory Framework

In an official notice, the SEC announced plans to revise key digital asset regulations to create a more comprehensive and adaptable regulatory framework. A significant component of this update is the introduction of the Accelerated Regulatory Incubation Programme (ARIP), a compliance initiative designed specifically for VASPs. The ARIP provides a structured pathway for VASPs to align with the country’s new regulatory standards.

The SEC has established a dedicated onboarding window to facilitate VASPs’ participation in the ARIP and has warned that enforcement actions will be taken against any VASP that fails to comply with the directives outlined in its Circular.

Enhanced Oversight and New Leadership

The regulatory updates come amid broader initiatives to enhance oversight in Nigeria’s crypto market, following the appointment of Emomotimi Agama as the new SEC Director-General. One notable proposal is to raise the registration fee for crypto exchanges from 30 million naira ($18,620) to 150 million naira ($93,000).

In addition to the SEC’s changes, the Central Bank of Nigeria (CBN) has issued guidelines governing banking relationships and account operations for VASPs. This coordinated regulatory effort underscores Nigeria’s commitment to responsibly regulate the virtual asset ecosystem rather than impose blanket bans.

From Ban to Taxation: A Shift in Nigeria’s Crypto Approach

Nigeria’s approach to cryptocurrencies has significantly evolved since 2021. Initially, the central bank banned banks from facilitating cryptocurrency transactions due to concerns over money laundering and terrorism financing. However, despite the ban, cryptocurrency adoption continued to rise, prompting the government to shift towards a taxation policy.

Timeline of Regulatory Changes:

Feb. 5, 2021: CBN directed banks and financial entities to close accounts associated with cryptocurrency transactions.
Feb. 9, 2021: CBN launched an investigation into financial institutions providing services to cryptocurrency traders.
Feb. 11, 2021: The Senate summoned CBN and SEC to discuss the potential impacts of cryptocurrencies.
Feb. 18, 2021: IMF supported CBN’s stance on cryptocurrencies.
Feb. 22, 2021: SEC emphasized the need for regulating cryptocurrencies.
Feb. 26, 2021: CBN clarified that individuals could trade cryptocurrencies but not through Nigerian banks or fintech platforms.
April 7, 2022: SEC recognized digital assets as securities and issued comprehensive regulations.
April 15, 2021: Discussions on cryptocurrency regulation continued between SEC and CBN.
April 26, 2021: EFCC warned about the risks of investing in Bitcoin.
July 22, 2021: CBN announced plans to launch “eNaira,” a central bank digital currency (CBDC).
Oct. 25, 2021: Nigeria launched “eNaira,” the first African digital currency.
Dec. 2, 2022: The finance bill included provisions to tax cryptocurrencies and digital assets.
May 28, 2023: A 10% tax on gains from digital asset disposal was instituted with the signing of the 2023 finance bill.

Despite these regulatory challenges, Nigeria remains a global leader in cryptocurrency adoption, with crypto transaction volumes increasing by 9% year-over-year to $56.7 billion between July 2022 and June 2023.

This new regulatory push aims to ensure that Nigeria’s cryptocurrency market continues to grow in a well-regulated and secure manner.

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