Status of Cryptocurrency business in Nigeria

Cryptocurrency is referred to as any form of currency that exists digitally or virtually and uses cryptography to secure transactions. It is also a digital payment system that does not depend on banks to verify/validate its transactions. Examples of cryptocurrencies are Bitcoin, Ethereum, Lite coin, Hamster Kombat. Virtual asset service providers (VASP) and Digital assets providers also known as Crypto companies are organisations that allow you to buy or sell cryptocurrencies from other users at the current market price, they provide an exchange service such as Binance, Bitstamp, Bundle Africa, Buycoins etc., some also provide wallet service where one can store their coins such as Trust wallet, Bitso, Blockchain.com etc.

In Nigeria, there are quite a number of cryptocurrency companies, amongst them include Quidax, Cashfx Nigeria, Bybit, Luno, Kucoin. Quidax for example operates a cryptocurrency exchange and digital asset app that allows users to buy, sell, and store popular cryptos. The regulatory body governing over the affairs of the virtual assets service providers and digital assets entities is the Central bank of Nigeria and Securities and Exchange Commission. In 2023, the Central bank of Nigeria launched a regulatory sandbox for blockchain and fintech innovation payment systems. In June 2024, the securities and exchange commission directed crypto firms operating in Nigeria to apply for its program called the Accelerated regulatory incubation program (ARIP).

SEC provided a special window on its website for VASPs to be registered temporarily, and gave a 30-day ultimatum for registering. It set the processing fee at N2,000,000 and also set a N20,000,000 fine for any VASP operating without registration. However, the registration under ARIP does not automatically transfer to full licensing, it only provides a temporary approval in principle until the digital assets’ rules are fully operational. The pre-qualification requirements for this program includes:

1. Applicants must be incorporated and have an office in Nigeria to facilitate regulatory oversight and customer interaction. They must leverage innovative technology to offer new or enhance financial services or products. The business must fall within the financial services regulated by the SEC.

2. Applicants should be prepared to commence operations with live customers and must commit to applying for full registration as soon as the necessary rules are established.

3. The product or service should address a specific problem or provide significant benefits to consumers or the industry.

4. The products must be safe for investors and firms must complete a fintech assessment form and engage with the SEC at an early stage.

5. The CEO or M.D must reside in Nigeria.

6. Applicants must be actively involved in investment and securities business and either be seeking registration or have pending virtual asset-related applications with the SEC.

7. Applicants must provide a sworn undertaking confirming among other things, that the applicant, its directors, chief executive, and key personnel have not been convicted of fraud, dishonesty, or other relevant offences.

8. They must also submit an operational plan and a business model with a clear value proposition, along with provisions for investor protection.

According to the SEC, failure to comply with any of the above requirements may result in a penalty of not less than N5,000,000 at the first instance and an additional N200,000 for each day of default.

Once the applicants are accepted into the ARIP, they will have to submit regular reports to the SEC. These include weekly and monthly trading statistics, quarterly financial reports, compliance reports, and incident reports. This serves a way of monitoring the activities of cryptocurrency companies operating in Nigeria.

Team 618 Bees

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