Nigeria Tightens Crypto Regulation: 30-Day Ultimatum

In a significant regulatory move, Nigeria’s Securities and Exchange Commission (SEC) has issued a 30-day ultimatum to all cryptocurrency exchanges and digital asset traders operating within the country to re-register their businesses or face potential enforcement actions. This directive marks a pivotal step in Nigeria’s broader strategy to bring digital assets trading under stricter regulatory oversight.

The SEC’s announcement comes with a clear mandate for both existing and prospective virtual asset service providers (VASPs) to complete their registration via the SEC ePortal within the stipulated timeframe. “All operating and prospective VASPs are hereby directed to visit the SEC ePortal to complete the application process no later than 30 days from the date of this circular,” stated the commission on its website.

This regulatory push is not occurring in isolation. Nigeria, Africa’s most populous country, boasts a vibrant cryptocurrency landscape. Despite a previous Central Bank of Nigeria (CBN) ban that prohibited banks from facilitating crypto transactions—a measure in place since 2022—the country has seen significant growth in crypto adoption. According to Chainalysis, Nigeria ranked 11th on the Global Crypto Adoption Index in 2022 and surged to second place in 2023, even amidst ongoing regulatory challenges.

The SEC’s cautious stance towards digital assets has been consistent. In a June 2023 circular addressing a fraudulent entity masquerading under the crypto exchange Binance’s name, the SEC warned that cryptocurrencies are “extremely risky and may result in total loss of their investment.” This skepticism has been further compounded by accusations from Nigerian authorities earlier in the year, targeting exchanges like Binance as potential conduits for money laundering and disruptive influences on foreign exchange rates.

Additionally, the SEC recently issued warnings against investments in meme coins like DAVIDO, promoted by Nigerian Afrobeats star Davido, reflecting its ongoing concerns over the speculative nature of certain digital assets.

In an intriguing development, the SEC is also exploring the potential of tokenization. The commission is planning to develop a pilot program for a permissioned liquidity pool that will include tokenized bonds and deposits, indicating a nuanced approach to digital asset integration.

This latest registration requirement is described by the SEC as being “in line with current realities,” signaling a pragmatic acknowledgment of the growing prominence of digital assets while underscoring the necessity for robust regulatory frameworks to mitigate associated risks.