Nigerian regulatory agencies seem to be turning a lot of attention to the cryptocurrency sector in recent times. With the country’s persistent economic and forex issues, it seems the government is looking into every possible way to fix the issue, and that includes tightening the reins on cryptocurrency firms and the movement of digital assets in the country.
This is coming despite the innovative ways that crypto has revolutionized several industries and can now be used all across the globe. For example, crypto can now be used to fund travel, buy a car, purchase clothes, and play and wager on games like roulette and blackjack online. The benefits of using it for such purchases, especially gambling, are anonymity, speed, and global accessibility.
However, even crypto’s growing global adoption has not deterred the government in Nigeria from making moves to restrict, regulate, and monitor its use. The Securities and Exchange Commission (SEC) has just issued a directive that crypto firms and digital traders register their businesses within thirty days. In a statement released on June 21st, the agency stated that firms that do not comply with the new directive risk facing enforcement actions.
This directive applies specifically to crypto exchanges and digital asset traders and comes on the back of a new program from the agency. The program tagged the Accelerated Regulatory Incubation Program (ARIP) for Virtual Assets Service Providers (VASPs) was initiated to amend the current rules about issuing digital assets, offering platforms, exchanges, and ownership in regards to virtual asset service providers (VASPs) and align them better with industry standards.
Despite being a relatively new industry, crypto is already pervading every sector and industry and offering a new way for innovative businesses like online anonymous casinos and e-commerce stores to operate. However, these new developments might currently be at stake with the new SEC ruling.
New Program for Crypto Regulation
The SEC has provided a portal for prospective virtual asset service providers to complete their application process. In the accompanying framework document, the agency highlights three major objectives of the Accelerated Regulatory Incubation Program (ARIP).
ARIP is intended to give participants the opportunity to receive guidance relating to the Commission’s regulations before becoming fully operational in the capital market while allowing the Commission to understand the digital asset business models. This mutual understanding would allow it to properly address issues surrounding market integrity, investor protection, and money laundering.
However, the program’s major objective is to accelerate the onboarding of entities that have filed their applications and enable those who are qualified to get “approval in principle” from the Commission, pending when the more robust Digital Assets Rules become operational.
The SEC set a two million naira processing fee (about $1400) for the application and a fine of 20 million Naira on any VASP found operating without the required registration. This new directive has elicited different reactions from the public, with many receiving the news with some skepticism. For them, the Commission is subtly cracking down on the cryptocurrency industry.
Government Crackdown on CryptoCurrency
Nigeria has a thriving cryptocurrency industry that is driven mainly by its youth population. In 2021, the country’s apex financial institution, the Central Bank of Nigeria, sent out a statement prohibiting banks and financial institutions from facilitating cryptocurrency transactions. Although the ban has since been lifted, its imposition signaled hostility towards the sector.
It is worth noting that despite the ban being in place for more than two years, the Nigerian cryptocurrency industry continued to grow, which may have been the catalyst for yet another hostile move from the government in recent times. The government has accused cryptocurrency exchange platforms of being a conduit for manipulating the country’s forex market and laundering money.
In March 2024, The Federal Inland Revenue Service (FIRS) charged the cryptocurrency exchange platform Binance and two of its executives for tax evasion. Less than a week later, the country’s financial crimes outfit, the Economic Financial Crimes Commission (EFCC), charged the executives with money laundering, and one of the executives spent time in custody.
There also seems to be a fear around the volatility of crypto assets. The Securities and Exchange Commission has issued warnings about the “extremely risky” nature of crypto assets in the past, warning citizens that they can lose all their investments in cryptocurrency. This fear was fuelled further by the continued crash of Bitcoin, the most adopted cryptocurrency.
While the government seems to be concerned about the effect of lost crypto investments on its citizens, other actions by the government lend credence to a harsh bias towards the sector. Earlier in the year, the National Security Adviser classified crypto trading as a national security threat, directing certain fintechs in the country to block accounts trading in crypto. Telco providers were also directed to disable access to crypto exchange platforms. These do not signal a willingness to support the growth of the industry.
Despite continued challenges, the Nigerian crypto space continues to grow, with peer-to-peer trading platforms and social media serving as points of interaction. The resilience of the sector against harsh directives by government agencies has probably inspired this new approach to regulating the sector. Adopting a robust regulatory system for crypto might help curb some of the irregularities that the government seems really hung up on.
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