Nigeria gives VASPs 30-day ultimatum to comply with new rules

Nigerian regulators mandate that Virtual Asset Service Providers (VASPs) update their applications within 30 days to comply with new rules concerning digital asset issuance, offering platforms, exchange, and custody.

Nigeria updates crypto regulations 

The Nigerian Securities and Exchange Commission (SEC) has announced plans to update crucial digital assets regulations in an official notice to the public. The amendments aim to strengthen the regulatory framework, ensuring it is more comprehensive and adaptable to the complexities of digital asset markets.

As part of this regulatory update, the SEC has introduced the Accelerated Regulatory Incubation Programme (ARIP). This is a specialized compliance initiative tailored for virtual asset service providers (VASPs).

The program offers VASPs a structured pathway to align with the country’s new regulatory standards.

According to information published on the SEC’s website, a dedicated onboarding window has been established to facilitate VASPs’ participation in the ARIP.

Additionally, the SEC stated that it will initiate enforcement actions against any operating VASP that does not comply with the directives outlined in its Circular.

This regulatory update is a component of Nigeria’s broader initiatives to enhance oversight of its rapidly expanding cryptocurrency 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 tandem with these SEC changes, the Central Bank of Nigeria (CBN) has issued guidelines governing banking relationships and account operations for Virtual Asset Service Providers (VASPs) in the country. 

This coordinated effort highlights Nigeria’s commitment to regulate the virtual asset ecosystem responsibly rather than imposing blanket bans.

From ban to taxation

Since 2021, Nigeria’s approach to cryptocurrencies has shifted notably. Initially, the central bank banned banks from facilitating cryptocurrency transactions due to concerns over money laundering and terrorism financing. 

Despite this ban, cryptocurrency adoption has continued to rise, prompting the government to pivot towards a taxation policy. Here’s a timeline:

• Feb. 5, 2021: The Central Bank of Nigeria (CBN) issued a circular directing banks, non-bank financial institutions, and other financial entities to close accounts associated with cryptocurrency transactions within their systems.
• Feb. 9, 2021: The CBN launched an investigation into financial institutions providing services to cryptocurrency traders.
• Feb. 11, 2021: The Senate summoned the CBN and the SEC to discuss the potential impacts of cryptocurrencies on Nigeria’s economy and security.
• Feb. 18, 2021: The International Monetary Fund (IMF) supported the CBN’s stance, highlighting concerns that cryptocurrencies could facilitate illicit activities. On February 22, 2021, the SEC emphasized the necessity of regulating cryptocurrencies.
• Feb. 26, 2021: The CBN clarified its position, stating that while individuals were not prohibited from buying and trading cryptocurrencies, they could not do so through Nigerian banks or fintech platforms.
• April 7, 2022: The SEC formally recognized digital assets as securities and issued comprehensive regulations governing the exchange and custody of cryptocurrencies within Nigeria. 
• April 15, 2021: Discussions between the SEC and CBN regarding cryptocurrency regulation continued, as confirmed by the SEC.
• April 26, 2021: The Economic and Financial Crimes Commission (EFCC) warned Nigerians about the risks of investing in Bitcoin (BTC).
• July 22, 2021: The CBN announced plans to launch the “eNaira,” a central bank digital currency (CBDC), distinct from Bitcoin and other cryptocurrencies.
• Oct. 25, 2021: Nigeria became the first African nation to introduce its digital currency, the “eNaira.”
• Dec. 2, 2022: Zainab Ahmed — the Minister of Finance, Budget, and National Planning — disclosed provisions in the latest finance bill to impose taxes on cryptocurrencies and other digital assets. 
• May 28, 2023: Former President Muhammadu Buhari signed the 2023 finance bill into law, instituting a 10% tax on gains from the disposal of digital assets.

Despite facing regulatory challenges, Nigeria continues to stand out as a global leader in cryptocurrency adoption. The volume of crypto transactions in the country increased by 9% year-over-year to $56.7 billion between July 2022 and June 2023.